US sorghum lifts Chinese spirits

Increasing alcohol consumption in China tied to the nation's economic expansion is raising the import of US sorghum, a grain used to make baiju, a traditional Chinese spirit.

The International Grains Council said China's import of US sorghum may be even greater than US farm officials thought. Agrimoney.com reported the council as saying that so far in 2013-14 it has received orders for 400,000 tons of sorghum, most of which will be shipped through November to southern China.

Agrimoney.com quoted IGC analyst Chris Lawson as saying the organization got that import figure from "a couple of different sources". IGC could not be reached to confirm the report.

Agrimoney.com said the IGC figures are greater than the US Agriculture Department's figures. A USDA spokesman declined to comment on the Agrimoney report, saying the agency would not engage in speculation. It did confirm the USDA data cited by Agrimoney, that Chinese buyers have so far bought 13,500 tons of US sorghum for 2013-14 and that combined export sales and shipments to China for 2012-13 are expected to reach 62,000 tons.

The increase in sorghum imports indicates that US sorghum exports are poised for a rebound after years of lean times. US sorghum production is projected to reach 10.03 million tons (395 million bushels) in the upcoming harvest - up 62 percent from last year's 6.2 million tons (244 million bushels), according to USDA figures.

The increase underscores the export market's importance, according to the US Grains Council.

"With USDA's significantly improved production estimate, combined with the good to excellent sorghum crop currently being harvested, now is a prime time to market this product around the world," Kimberly Karst, USGC director of global programs, said on the grain council's website. "Our international customers need to be reminded of the quality nutritional characteristics US sorghum offers and the increase in availability we will have this coming marketing year."

Baijiu is a distilled liquor, generally about 80 to 120 proof, or 40-60 percent alcohol by volume, and made from sorghum or rice. It is often served at family get-togethers and celebrations. Some scholars believe that the technique for making the liquor from fermented sorghum seeds originated in the Xia Dynasty, circa 2100 BC to 1600 BC.

The popularity of baiju in China, where only about 2 percent of the volume of spirits consumed are foreign-made, has captured the attention of spirit companies looking to raise their presence in China.

Last week, London-based Diageo PLC, the world's largest drinks company by sales, moved to increase its ownership of baiju joint venture Shui Jing Fang. Diageo, the maker of Johnnie Walker whisky, said Chinese authorities gave it the go-ahead to buy the remaining 47 percent stake it didn't already own in joint venture partner Sichuan Chengdu Shuijingfang Group, or SJF Holdco, for 233 million pounds, or $357.6 million.

The deal increased Diageo's stake in Shui Jing Fang to 39.7 percent from 21 percent while converting the baiju venture into a foreign enterprise wholly owned by Diageo.

Diageo, which competes in China with France's Pernod Ricard SA, has been increasing its stake in the baiju business for several years to raise its profile in emerging markets. In general, European drinks makers have expanded into emerging markets such as China in recent years as sales of premium spirits slow in recession-plagued Europe.

China's recent economic slowdown could diminish immediate benefits from the deal. Last month, French alcohol maker Rmy Cointreau forecast slow second-quarter demand in China for its flagship cognac brand. Another potential complication to the Shui Jing Fang deal is the Chinese government's crackdown on corruption, which targets extravagant consumption and gift-giving, including premium liquor. But Shore Capital analyst Phil Carroll was quoted by Reuters as saying that on a medium to long-term basis, the deal should position Diageo well for the future.

michaelbarris@chinadailyusa.com