Opportunities for Australian Sorghum in ChinaAustralian Grains Industry Conference

22 March 2018Owen Goddard - COFCO International

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Overview of Sorghum in Australia: Where and When

• Production concentrated across QLD and Northern NSW.

• Planting commences October for southern regions whilst the Central Queensland farmer will wait until February to plant. Harvest can be spread from February-August.

• Summer crop alternatives include; Cotton, Mung Beans, Maize, Soybean & Sunflower

J F M A M J J A S O N D

PLANTINGHEADING HARVESTING

C.QLD

S.QLD

NSW

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Climatic Influences on Sorghum Production• Variable weather and many climatic influences.

• Significant factors for growing regions include:• El Nino Southern Oscillation • Madden-Julian Oscillation• Sub-tropical ridge

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Production vs. Monthly Southern Oscillation Index

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Sorghum Summer Crop 2017-18: Production Risks Loom…

• 2017/18 growing season started positively with good moisture balances.

• January conditions were dismal and capped production potential.

• February rain brought mixed fortunes:• Planting boost for CQ farmer.• Tempered quality for southern harvest.

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NSW QLD Planted Acreage (kHa)Monthly Relative Precipitation (Oct ‘17 – Mar ‘18)

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Australian Supply and Demand

• Australian domestic demand mainly feedlots – Cattle and Poultry à 500-900kmt per annum• Ethanol production provides stable secondary source for domestic demand à 150-200kmt per

annum.• Queensland and NSW ports provide ample support for export program.

Port Mackay Graincorp

Gladstone Graincorp

Fisherman Island Graincorp

Queensland Bulk Terminal

Carrington Graincorp

Newcastle Agri Terminal

Ship Capacity (kMT)

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Exports Carry Out Production

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Export Demand: China overtakes Japan and dominates

• China is Australia’s most valuable partner for exports.

• Japan now buys exclusively from USA and Argentina.

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ChAFTA, Quality Challenges, Initiatives Undertaken

• China-Australia Free Trade Agreement (ChAFTA) • enacted 20 December 2015 – currently in 4th year of operation. • 96% of Australia’s goods exports to China now eligible to enter duty-free or with preferential

access.• ChAFTA completely eliminated tariffs on Australian barley and sorghum.

Quality

• Australian Quality Profile: Red Colour – High Starch – 30% total starch waxy - Very low tannin <1%

Challenges

• Quarantine risk: Johnson Grass (Sorghum Halepense)

Initiatives

• Government-Academic-Commercial joint imitative to improve quality attributes for Baijiu• Increased intergovernmental interaction to manage quarantine issues • Development of non GMO Sorghum varieties that allow better control of Johnson Grass

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China Production: Corn’s dominance over sorghum expected to continue

• Chinese production of sorghum is obviously insignificant compared to corn.

• Increase in sorghum is expected to be underwhelming despite government support rollback.

• Established corn domestic programs will be hard to switch out of.• Along with potential US sorghum import implications is a boon for

Australian sorghum growth.

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China: Production of Corn & Sorghum vs. Minimum Support Price

Corn Sorghum MSP

China accession to WTO

Direct payment to grain producers

Establishment of TR Corn ProgramConclusion of TR

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Chinese Demand Continues to Increase

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China Feed Demand

Corn Feed Demand SBM Feed Demand Wheat Feed DemandRSM Feed Demand Barley Feed Demand Other

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Sorghum Demand for Baijiu

Domestic Sorghum Imported Sorghum

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Corn Demand for Ethanol

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Sorghum Imports to China

United States Australia Argentina

Will US exports continue to dominate?

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China Monthly Imports of US DDGS

Investigation into American DDGS announced.

Temporary importer deposit 10-10.7%

<54% and <12% anti-dumping and anti-subsidy duty for 5 years

China to probe US Sorghum anti-dumping: to be continued…

• Feb 2018: China launches investigation against US sorghum imports

• Investigation may conclude Feb 2019 though potential extension to Aug 2019

• No concrete penalties – but if DDGS was anything to go by…

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Status Quo: Alcohol first - Feed later • Staple Baijiu demand underpins Australian sorghum with the balance of production working

into Chinese feed rations if / when it prices against corn.

Australian production is too volatile to be wholly depended on – what will be the catalyst• Weather - The “Glass House” effect… the miraculous introduction of consistent weather

patterns.• Varieties - Further development of drought tolerant, higher yielding varieties or the

introduction of GMO sorghum.• Area sown - Money talks – more productive acres (irrigation) switch from alternative crops

(cotton) to sorghum.

China is more important to Australia than Australia is to China…for now?• Trade restrictions & changes to Government policy. • Reducing corn stocks. • Increasing demand from feed, ethanol and alcohol sectors.• Further enhancement in Australia’s ability to supply consistent volumes.

Final Thoughts