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China investigation stoking U.S. sorgum trade worries
 


ST. LOUIS, Mo. — China’s announcement of anti-dumping and countervailing duty investigations related to U.S. sorghum imports reverberated through agriculture last week, from farm bill policy comments on Capitol Hill to sorghum cash bids in Kansas.

The Feb. 4 announcement from China’s Ministry of Commerce initiated an investigation that may take up to a year. “National Sorghum Producers (NSP) is aware of this action and is prepared to participate fully in the investigations in cooperation with other sorghum industry participants,” said Tim Lust, NSP CEO.

Following the guidelines of the World Trade Organization (WTO), China will investigate whether the United States promoted sorghum trade and production policies that put Chinese producers at a pricing disadvantage against imported sorghum.

Agriculture Secretary Sonny Perdue highlighted the sorghum issue during testimony to the House Agriculture Committee on the state of the U.S. rural economy, relative to farm bill discussions.

“For those of you in grain sorghum country, we know just with the mention of China considering anti-dumping and countervailing duty taxes, the cash price on sorghum dropped over a dollar, which was 25 percent, just yesterday on the cash prices,” he said Feb. 6. “So we see how fragile we are from a trade perspective, how dependent our economy is on trade.”

Sorghum cash bids at country elevators in western Kansas were $6.01-$6.19 per cwt., falling to $5.42-$6.14 on Feb. 5, after news of China’s announcement. Central Kansas terminal elevator bids fell more sharply, from $6.51-$6.99 on Feb. 2 to $5.42-$6.76 on Feb. 5.

Bids fell further during the week, with those two markets settling at $5.46-$6.17 per cwt. as of Feb. 8, according to the National Grain Market Summary from USDA.

Besides the immediate impact on prices, the announcement is expected to temper sorghum trade volumes this year. “We’d had a tremendous run-up in sorghum exports to China over the last three years,” noted Rep. Michael Conaway (R-Texas), House Agriculture Committee chair, during questions with Perdue.

China’s announcement about sorghum investigations is widely seen as retaliation for recent U.S. moves to place new tariffs on Chinese products, including washing machines, solar panels and aluminum. Trade analysts expect China’s investigations could deter its buyers from purchasing U.S. sorghum and shifting to other sources this year, such as Australia.

“We think the sorghum issue will mollify over a period of time,” said Perdue.

But policymakers at the USDA, along with others in Washington, are mindful of how sensitive trade negotiations can impact agriculture. “We just need to be very careful how we handle the ag economy because, as you know, agriculture is typically the point of the spear of retaliatory measures. And we see even the conversation considering countervailing duties, what that can do to a market like sorghum,” added Perdue.

Agricultural products have been targeted by China during previous trade disputes with the United States. In 2008, China responded to a U.S. tariff on tires with a tariff on U.S. chicken. The Obama administration challenged the chicken tariff in the WTO, which ruled in favor of the U.S.; however, chicken export volumes to China were lower during the dispute.

It is yet unclear what China’s pending investigation could do to U.S. planting intentions for sorghum. The NSP was formerly expecting plantings to increase by as much as 1 million acres this year. Growers will weigh price forecasts with profitability and other planting alternatives over the next couple months.

In the meantime, the U.S. sorghum industry is prepared to fully participate in the investigations, said Lust. “U.S. sorghum farmers do not dump our products into China or elsewhere, and our products are not unfairly subsidized. A fair proceeding will demonstrate these facts,” he said.

Greg Doud, a Kansan who is on track to become the next chief agricultural negotiator in the Office of the U.S. Trade Representative, said agricultural concerns are vital as the U.S. formulates its trade strategy with China. In an interview prior to the sorghum announcement, he said the U.S. must prioritize broader trade policy with China to maintain and grow market access for U.S. farm products in that nation.

“We have to put in the time and the effort. It’s going to be difficult, but the importance of it is almost immeasurable,” said Doud, on Kansas State University’s “Agriculture Today” radio program.

2/14/2018