Texas’ Grain Sales To China Surge, Even As Other Exports Falter

Until recently, chemicals were Greater Houston's number one export to China. But in 2014, grain knocked chemicals out of the top spot. What makes it all the more remarkable is that, just two years earlier, those grain exports weren't even on the map. That shift may help to buffer Houston from the effects of a Chinese slowdown.

Wages have been rising in China over the past few years. Workers have more money to spend, particularly on food. Meat consumption is way up, and with it, the demand for feed grains to fatten up hogs, poultry, and cattle. That's created an opening for Texas farmers.

"China has long had tariff controls and quotas for imported corn," says Mark Welch, a grain marketing economist with the Texas A & M AgriLife Extension Service. "They have not had those restrictions for corn byproducts or for grain sorghum. So they've kind of been letting those come in under the radar."

The U.S. is by far the leading world supplier of sorghum, with Texas the nation's second-largest producer. The Ports of Galveston and Houston, in that order, are the top two U.S. ports handling that traffic.

"Most of our grain sorghum is bound for export markets," Welch says. "With China stepping into the market over the last year, year and a half now, that's been a big boon for our sorghum producers."

In 2014, Greater Houston exported close to $1.2 billion dollars' worth of sorghum to China, up from zero in 2012. By comparison, exports of industrial goods like chemicals and plastics have been shrinking as China's economic growth slows.

Cereals are priced in U.S dollars, just like oil. When China's currency, the renminbi, falls against the dollar, as it did last week, sorghum gets more expensive for Chinese farmers. That could slow the growth of Greater Houston's exports going forward. The bigger concern is that Chinese workers, worried about their jobs, start cutting back on their spending and eating less meat.