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China slaps US sorghum imports with hefty deposit
April 17, 2018 | 2:32 PM
by Reuters
The move follows the launch of an anti-dumping investigation just over two months ago into imports of the ingredient used in livestock feed. Photo - File
 
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Beijing: China said on Tuesday it will slap a hefty temporary deposit on imports of US sorghum after finding the US grain has damaged the domestic industry in a preliminary antidumping ruling, stirring trade tensions between the world's top two economies.

CHS Inc and other US companies will have to put a 178.6 per cent deposit on the value of sorghum shipments to the country in what Beijing called a "temporary antidumping measure" as the government continues to probe imports of the grain.

Trade sources said the deposit or fee was much higher than they had expected and will likely bring US imports to a halt and inflate prices of alternatives, such as barley. Sorghum is used in livestock feed and the fiery Chinese beverage baijiu.

The deposit, which trade experts equated with a duty, is effective from Wednesday, the Ministry of Commerce said in a statement. It is the latest shot by Beijing at its top trading partner in a mounting trade spat, likely aimed at major American farm states that backed US President Donald Trump.



"It's very high. Basically US sorghum won't be able to come in," said Fan Jingya, grains analyst at Cofco Futures.

The move comes out of an anti-dumping investigation launch just two months ago in retaliation for aggressive trade actions by Washington, including steep tariffs on solar panels and washing machines.

The United States shipped 4.76 million tonnes of sorghum to China in 2017, worth around $1.1 billion and making up the bulk of China's roughly 5 million tonnes of imports of the grain last year, according to Chinese customs data.

Other companies likely to be affected are Archer Daniels Midland - a top seller of US sorghum into China - along with Cargill and Louis Dreyfus.

The government said on Tuesday it found the domestic industry was "substantially damaged" by US sorghum imports that are being dumped into the country. It said it will issue a final ruling at a later date, but did not give a timeline.

Prices of soymeal and rapeseed meal used in animal feed jumped as the move kindled concerns that China would also impose penalties on soybeans and other agricultural products from the United States as the spat escalates.

The world's top importer of soybeans threatened earlier this month to impose tariffs on sorghum, soybeans and 104 other US products.

The deposit scheme is in addition to that proposal.

Curbing imports of grains is considered one of the most powerful weapons in Beijing's arsenal in the growing spat with the United States. This would hit at Trump's core political base at a time when the global grain market is in surplus and growers world-wide are struggling to find homes for their products.

Soybeans were the biggest US agricultural export to China last year at a value of $12 billion.

Still, trade experts and farmers say limiting imports of livestock feed ingredients could push up prices locally, hurting China's vast agricultural sector and potentially inflating retail pork prices in the world's top consumer of the meat.

Traders, who had rushed to increase imports prior to the ruling, were reeling from the scale of the deposit on Tuesday. A trader with an international firm estimated there are more than two million of tonnes of sorghum on the water heading for China.

"We were expecting like 35 per cent," said a source at another international trading house. "Sorghum imports now are dead. No one can afford that high amount of tariffs."

Imports are usually high in April and May, but cargos are likely to get diverted to other points in Asia, traders said.

"I don't know what (the importers) will do, but it will be rough," the first trader said.

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