Global shipping issues are mounting. From drought issues posing problems in the Panama Canal to growing tensions and attacks in the Red Sea, it's causing freight rates to skyrocket and ongoing delays in shipping products around the globe.
Tensions in the Red Sea are growing, as U.S. and British naval forces fight off attacks by Yemen-based Houthis. Forces shot down 21 drones and missiles fired by Houthis last week, marking the largest attack since the war between Hamas and Israel started three months ago.
The conflict is causing shipping issues, as merchant shippers don’t want to risk their vessels being attacked. One of the world’s largest shipping companies, Maersk, which is headquartered in Denmark, announced last week it will avoid sending ships through the Suez Canal. The news came after Yemen-based militants tried to board a Maersk ship more than a week ago.
The U.S. Central Command reports there have been 25 attacks against merchant ships in the southern Red Sea since mid-November. Dan Basse of AgResource Company says the shipping issues in the area are a big concern for agriculture, specifically for Ukrainian exports.
“A lot of that Ukrainian corn heading to Southeast Asia will go through there, and so as the price of insurance and the difficulty in moving freight through that part of the world increase with the spreading tensions in the Middle East, they are now forced to go around the horn of Africa. This is raising freight cost by about $20 a ton. Ukraine was just getting that corridor working, and now they're fighting with this,” says Basse.
He says while it’s causing chaos in the Red Sea, it could be a positive for the U.S. market, as U.S. corn may be needed to replace that Ukrainian business.
“I think you're going to find a little U.S. corn supplementing that Ukrainian business. It's going to be positive for the U.S. market. I think it's something in agriculture, we need to be watching carefully,” said Basse.
Shipping issues continue to pile up as Panama Canal deals with reduced ships and capacity as the area battles ongoing drought. The Panama Canal typically handles 8% of the world's shipping volume.
EDITOR’S TAKE:
It is unfortunate that geopolitical considerations are having an increasingly negative impact on global shipping. However, to the extent it boosts the possibility of increased exports of U.S. corn and other agricultural products, it could have some positive impact. Recent commodity prices, especially corn, have been under price pressure in U.S. markets. Boosting exports could provide some much-needed positive momentum in 2024. It’s a little too early to predict what, if any, the shipping concerns will have on corn prices, but it is worth watching. More exports, higher corn prices, more truck sales!
