US Sorghum "Armada" Turns Away From China After Tariffs

China's nearly 200% tariff on imports of US sorghum is already having a profound impact on the global grain trade. And in the latest evidence of how quickly the tariffs have been felt by US producers, Reuters is reporting that an "armada" of cargo ships carrying $216 million of sorghum from the US to China has changed course since Beijing imposed the tariff last week, as grain exporters are suddenly worried about taking a sizable loss on the loads. 

Since the tariff was imposed, the five shipments, which were all destined for China when they were loaded at Texas Gulf Coast export terminals owned by grain merchants Cargill Inc and Archer Daniels Midland Co, are now liable for a hefty deposit to be paid based on the value of the goods. The payment would likely make the shipments unprofitable, according to Reuters.

Sorghum

Beijing announced on Tuesday that it would impose the 178.6% tariff following a brief investigation. That followed the imposition of tariffs as high as 25% on range of products produced in America. In the world of US agricultural products, China has also imposed sanctions on US soybeans - a decision that is expected to create major disruptions for US farmers.

Cargill declined to tell Reuters where the ships that it loaded are heading now that they've been redirected away from China.

The Panamanian-flagged ship called the N Bonanza, was churning its way northeast across the Indian Ocean earlier this week, carrying more than 67,000 tonnes of sorghum from ADM’s elevator in Corpus Christi, Texas, according to Reuters shipping data.

Eleven hours after the anti-dumping deposits were announced, the ship stopped and then slowly tracked northwest.

The RB Eden, a vessel carrying 70,223 tonnes of sorghum loaded at the same ADM terminal, was headed east-northeast through the Indian Ocean off the coast of South Africa. It turned around.

Hours later, the Stamford Eagle - hauling sorghum from Cargill’s elevator in Houston - turned around off the western coast of Mexico.

At least two other vessels have also suddenly changed course: the Ocean Belt and Xing Xi Hai, both loaded at Cargill’s terminal.

It is unclear where the vessels are now heading.

But US exporters aren't the only ones feeling the pain from the tariffs: Suppliers of sorghum on the Pacific, Indian and Atlantic oceans are all hurting

Sorghum is a niche animal feed and a tiny slice of the billions of dollars in exports at stake in the trade dispute between the world’s two largest economies, which threatens to disrupt the flow of everything from steel to electronics.

As of now, the tariffs won't have a significant impact on Archer Daniels or Cargill - two of the world's largest grain merchants. But it is a warning that China won't hesitate to effectiv

"For their overall trade businesses, this is not that substantial. But it’s a warning. If China really does start slapping tariffs on everything, like soybeans and corn, things could get really ugly, really fast," said Bill Densmore, senior director of corporate ratings at Fitch Ratings.

But shipping companies may be forced to discount their cargoes to sell them.

"They’re not in a strong bargaining position considering they’ve got shipments from across the ocean that they have to sell and get the boats cleared out," said economist Daniel O’Brien of Kansas State University in the top U.S. sorghum-producing state.

And falling sorghum prices in Texas have already rattled farmers.

"This tit for tat has to stop, and talks to find reasonable and lasting solutions must begin, for the good of U.S. agriculture and the customers we have spent decades working to win as loyal buyers," said Tom Sleight, president and CEO of the US Grains Council.

But the real reason US producers should worry about an escalating trade war can be found in the backlash to the US's decision to ban sales of semiconductors to China's ZTE, a Chinese smartphone manufacturer.

Across China, citizens rallied in support of ZTE - and condemned the US measures as an attack on China. Restaurants offered ZTE employees free meals. They even "thanked" the US for helping force China to become more self-reliant.

Meanwhile in the US, Trump's aggressive rhetoric has been met with unease and criticism from the business community.

Given that, it's not difficult to imagine which side will be able to hold out longer while striking back with increasingly dramatic penalties.

Comments

Déjà view Slippery Slope Fri, 04/20/2018 - 21:53 Permalink

Sorghum Passport...Sorghum Visa...

China has world's 136th most powerful passport, 69 spots behind Taiwan

BY ALEX LINDER IN NEWS ON OCT 26, 2017 3:00 AM

Passport Index has updated its Global Passport Power Rank for 2017, showing once again that while China may be the world's second most powerful economy, its passport remains pretty weak.

With a visa-free score of 60, the Chinese passport is as powerful as passports from Sierra Leone, Ghana and Cuba, ranking 136th out of 199 countries and territories. Chinese passport-holders can now get into 22 countries without a visa and can receive a visa upon arrival in 38 additional countries, most of which are located in Africa, Southeast Asia and Latin America. To visit anywhere in Europe or North America, Chinese citizens need visas.

http://shanghaiist.com/2017/10/26/passport-power.php

In reply to by Slippery Slope

HopefulCynical zero_pussy Sat, 04/21/2018 - 00:20 Permalink

The actual solution is to suspend all trade with China, import and export, until they stop loading the fucking dice. Let their factories sit idle and their people go hungry for a few weeks.

Of course, we'd need to End The Fed and jail the banksters at the same time, or those leeches would just crash our economy into dust. It's all about the shek - I mean, the Benjamins. (Benji-shekels? Beckels?)

In reply to by zero_pussy

FBaggins gmrpeabody Sat, 04/21/2018 - 11:48 Permalink

The high tariffs on sorghum is a big loss to the US not a gain, and now that Trump has broken every conceivable International Law convention with his “symbolic” missile attack on Syria, showing what thugs the US, the UK, and Israel really are, more people and more nations in the world will begin to root for and cooperate with China and Russia in the trade war.

In 2017 the US produced about 369 million bushels of sorghum which was about 15 or 16% of the world’s sorghum production. Of the US production about 65% to 70% is exported to China. China has many other sources to purchase sorghum -  the Ukraine, Russia, Argentina, Australia and the list goes on.  Russia has already taken the lead in wheat production. To fill any void in the Chinese demand Russia will likely start producing more sorghum.

 

In reply to by gmrpeabody

GreatUncle HopefulCynical Sat, 04/21/2018 - 06:39 Permalink

*The actual solution you mention but do not spell out and all nations need to do it.*

You have to apply trade barriers and become self sufficient by nation.

No more of this free trade bullshit = difference between labor costs ... because an idle factory in the US is equivalent to an idle factory in China if you remove the cost of labor, energy and government taxes.

Full automated and the same material in an item the only way to make it cheaper is to remove those same three things of labor, energy and government taxes ... or I look forward to see how you watch TV if I remove the screen or drive after I take the wheels off the car.

The material component is fairly stable it is all the other costs.

In reply to by HopefulCynical

pitz GreatUncle Sat, 04/21/2018 - 16:41 Permalink

Chinese factories have well-developed integrated supply chains.  American factories do not these days.  China's population is also in close proximity to the factories such that they can walk or ride their bikes.  Meanwhile I don't think Americans would tolerate living in on-factory-site dormitories, or just outside the gates of the factories.  Which is why factories have largely been relegated to the outskirts.  

So even if labour, energy, and taxes were the same, Chinese factories would still have enormous structural advantages.  

In reply to by GreatUncle

Theosebes Goodfellow Dank fur Kopf Sat, 04/21/2018 - 00:23 Permalink

Before you start shedding tears for "poor ol' Cargill", read Dan Morgan's Merchants of Grain.

I agree with a poster above. Ship this batch all to North Korea. Then raise the price to cover the tariff. Fuck 'em back. They need the feed more than we need ZTE phones. Hell, raise all the crops we sell them by the same amount the tariffs are across the board and let the chips fall where they may. Let's see whose economy is more resilient.

In reply to by Dank fur Kopf

curbjob kaboomnomic Sat, 04/21/2018 - 08:38 Permalink

No doubt a full blown trade war between the US and China would be painfull to both. Ultimately it would boil down to which country's  citizenry is most capable of  tightening their belts and sacrificing  instant gratification for the prosperity of future generations. The orderly manner in which people line up at the rice ration lines in China and  corn ration lines in the US should be a early indication of victory ... at the moment it's anyone's guess. 

In reply to by kaboomnomic

DemandSider kaboomnomic Sat, 04/21/2018 - 10:34 Permalink

How anyone could NOT predict the PRC tariffs on American aquifer exports is beyond me. It's worth it, of course, as only the dumbest country in the world would export commodities like hogs, grain, and soy beans in exchange for higher labor value added goods like computers, cell phones, and machine tools. I voted for Trump hoping for a  wise, Lincolnesque trade impulse, that is, the kind of trade policy that protects manufacturing, like The PRC smartly does. Even the limp wristed tariffs Trump has placed on steel and aluminum are well worth The PRC turning back our aquifer exports, but, somehow, I guess there are some in red, farm states who could not see this coming. Astounding.

In reply to by kaboomnomic

Oldwood Oldguy05 Fri, 04/20/2018 - 21:49 Permalink

China, with a gun held to their own head, says STOP OR I'LL SHOOT.

What would happen here if feed grain doubled in price? Lots of hungry mouths in China with meager incomes.

Recall how Egypt's problems arose due to the high cost of food.

War has it's costs and it's rewards. If risks are calculated properly, war can be very strategic.

China has a massive trade surplus that if ended would result in massive plant closures and unemployed people with NO safety net except clubs and pitchforks. Compound that with elevated food costs and you have a bomb.

I'll bet food against TV's any day.

In reply to by Oldguy05

DemandSider bshirley1968 Sat, 04/21/2018 - 10:46 Permalink

You don't hear me saying that. Our treasonous leaders know that exchanging 18th century commodities and other aquifer exports for higher value added manufactured goods is the most asinine trade policy a country could have. If Cuba could live with relatively few food imports from Russia, than The PRC could easily live without ours.

That being said, full denial of access to the American consumer goods market WOULD be an existential threat to The CCP, and The PRC knows that. I am very certain The PRC would react violently to tariffs on their state owned manufacturing complex, but it's best to get this over with NOW, than after a few more decades, when their ships will be able to blow the American presence out of the water, if the current, lob sided trade pattern continues.

In reply to by bshirley1968