Sorghum makes comeback amid U.S. drought worries
CHICAGO (Reuters) - As the worst drought in more than half a century plagues America's western Corn Belt, an unlikely crop is making a surprising comeback as farmers wrestle with fears of another parched year: grain sorghum.
Long before corn was king, sorghum was a popular feed crop among Plains farmers hungry for a plant that could withstand a hot, dry climate. As demand by livestock producers for corn grew in recent decades, profits surged. Sorghum fields gave way to miles of corn plants.
Now, as spring planting inches closer and weather woes could threaten the nation's corn crop west of the Mississippi for the second straight year, a small but growing number of U.S. farmers are reverting to this forgotten crop in a bid to meet the needs of livestock producers. They also see sorghum, also known as milo, helping to feed a voracious ethanol market amid forecasts that last summer's drought will shrink U.S. corn supplies to a 17-year low by the end of the summer.
For farmers, particularly those working on the western fringes of the nation's traditional Corn Belt, as well as in the Southeast hubs of poultry and hog production, sorghum offers the promise of healthy profits for a crop whose sales price tracks closely with corn's. For growers farming land that is relatively sandy or more prone to drought, sorghum offers the comforting assurance of harvesting a healthy crop even if the weather turns hot and dry this summer.
"It was such a bad year for corn last year," said Frank Hines, 56, who farms about 400 acres in Wayne County, North Carolina. "Corn has become such a high risk, I wanted to try something different."
As U.S. corn supplies grow short, demand for sorghum is flourishing among livestock producers and ethanol producers. POET Biorefining, the country's No. 2 ethanol maker behind Archer Daniels Midland Co (ADM.N), this week put out a call to farmers and grain elevators to buy sorghum for two of its South Dakota plants in a bid to help manage production costs.
And on Monday, sorghum seed developer Chromatin Inc said it had cut a deal to have up to 4,400 acres (1,781 hectares) of sorghum grain grown in South Dakota for POET, which would be used in the production of ethanol at its plant in Chancellor, S.D., later this year.
The agreement follows three earlier deals Chromatin inked to supply ethanol plants in California with sorghum. South Dakota is the No. 5 growing U.S. state of sorghum and No. 6 grower of corn, according to the U.S. Agriculture Department.
Other ethanol producers are also beginning to eye sorghum and other grains as a supplement to their corn supplies, a demand that has attracted the attention of farmers planning for this year's planting.
Among the historic cotton fields of the Carolinas, and in rural Kansas and Missouri towns now surrounded by winter wheat, farmers are meeting local agronomists to figure out planting schedules. Seed salesmen are scrambling to keep up with orders from farmers eager for early summer to come to their gold-green expanse. Some seed sellers are cautioning farmers that they're close to running out.
Agribusiness giant Dupont Pioneer (DD.N) expanded its acreage of sorghum seed production in Texas, the leading producer of sorghum, and elsewhere, banking on the demand being high in the wake of the Midwestern drought. So far, its sorghum business has seen double-digit growth, said Steve Reno, who manages the seed company's sorghum business.
"Most of the growers we've talked to have grown sorghum at some time of their life," Reno said. "They're looking at their farms with more stress and saying, 'I need to start looking at alternatives'" to corn and soybeans.
ECONOMICS PAY OFF
Sorghum's economic draws are impossible to ignore, say farmers. They often get healthier yields of sorghum than corn on marginal, sandier soils, and sorghum can better weather drought-stressed periods than corn during the growing season.
Though supplies of seeds are running short and prices creeping up, it typically costs farmers in the Southeast United States about $12 an acre to plant sorghum - versus $75 an acre for corn, according to area agronomists. It is also cheaper to grow, as sorghum tends to need less nitrogen in the soil than corn, say agricultural experts.
Meanwhile, demand from hog and poultry producers has driven up the cash-market prices of sorghum, so much so that it's price tag can nearly match corn, say farmers.
Some farmers in the southeast have started using sorghum as a crop to rotate with other commodity crops. They say they're seeing an unexpected benefit: using different types of chemicals on their fields is helping to fight pests and glyphosate-resistant pigweed that have plagued their soybean and cotton fields.
ONE COMPANY'S SORGHUM PUSH
Arguably, no other place in the United States has seen a bigger percentage jump in farmland shifting to sorghum than North Carolina.
That interest is spreading across the southeast, largely due to one company: Murphy-Brown LLC, a subsidiary of Smithfield Foods Inc SFD.N. The company, one of the nation's largest hog producers, has created a booming cash market for the grain in an aggressive bid to boost locally-grown supplies of feed.
Securing a steady supply of feed grains can be challenging, say company officials, as local livestock demands quickly outstrip farmers' supplies.
In the spring of 2011, Murphy-Brown began a pilot program with a group of North Carolina farmers to plant sorghum. The results from the initial 2,550 acres (1,032 hectages) were promising enough for the company to reach out to the state's farm community, said Terry Coffey, the company's chief science and technology officer.
Their message: If you grow sorghum, we'll buy it.
Some growers took a chance. About 50,000 acres of grain sorghum were grown in North Carolina last year. For farmer Lance Herndon, the decision came on the heels of his family's worst corn and soybean season in decades.
"It was either try this or know the rest of the season was going to be a wash," said Herndon, a fourth-generation farmer in southeast North Carolina. "I'd never seen sorghum until I poured it out of the bag."
Last fall, Murphy-Brown bought 4.2 million bushels of the 5 million bushels of sorghum that area farmers grew. The company would have bought all of it if it had been available, Coffey said.
Now, the company is talking to farmers who are weighing whether to plant sorghum on fields where cotton, corn and soybeans typically grow. One key draw: Murphy-Brown is offering to pay 95 percent of the corn board price, whether cash or futures, for sorghum.
The agricultural campaign is transforming the state's agricultural landscape, albeit slowly. Two years ago, North Carolina farmers grew less than 10,000 acres of sorghum - such a paltry harvest that the state didn't even register on USDA's survey radar.
This year, Murphy-Brown officials and local growers say North Carolina farmers are expected to plant "in far excess of" 100,000 acres of sorghum - bumping the state into the nation's top six largest producers.
CORN STILL REIGNS
Still, no one thinks the farm-sector's current interest in sorghum will have any significant impact on corn production this planting season. After all, U.S. farmers last year produced a mere 247 million bushels of sorghum - compared to 10.78 billion bushels of corn, according to the USDA.
After all, farmers have ramped up corn production so much that the amount of land planted with the crop has swelled by nearly 31 percent since 1990, according to U.S. Department of Agriculture data. In comparison, acreage planted with sorghum fell by nearly 41 percent during the same time period.
And last year's plantings - 6.24 million acres - were a pittance compared to sorghum's peak in 1957 of 26.9 million acres.
But the fact that farmers, particularly those on the fringes of the traditional Corn Belt, are diversifying their farms at all has raised questions among traders about how robust the corn acreage plantings will be this year.
"There's a lot of bantering about over this," said Tim Emslie, research manager at CHS Hedging Inc. "The incentives are still there to push corn, in terms of net returns. But everybody knows that the spring weather will have a big influence on this planting season."
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