Russia/Ukraine – The conflict moved through its third year with no end in sight. Attacks on grain handling facilities, difficulties shipping through the Black Sea and shifting production estimates out of both countries were followed closely by traders. 

Middle East – The Israeli war against Hamas in Gaza sparked wider disputes across the region. Resulting turmoil in energy markets was also felt in the grains and oilseeds, while trade through the Red Sea and Suez Canal was hampered.
 
Panama Canal – Low water levels at the Panama Canal created additional headaches for global grain movement in 2024, although that congestion eventually started to clear up.
 
Labour disputes – Labour unrest was a feature of the Canadian grain trade in 2024, with strikes and/or lockouts at both coasts and at both major railways.
 
China – China began an anti-dumping investigation into Canadian canola in the fall. The country remains the largest export customer heading into the New Year, but the threat of another trade dispute between the two countries remains ever present.

Trump – Trump’s new administration is bound to generate headlines through 2025, but his proposed policies were already riling up the ag markets ahead of his inauguration. Most notably, import tariffs and resulting retaliation could dramatically alter international trade flows.

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Shipping capacity continues to be hampered by ongoing unrest around the Red Sea, wrote FCC senior economist Leigh Anderson in a July 17 article on the lender’s website.

As recently as July 15, Houthi fighters claimed to have targeted three vessels in the Red and Mediterranean seas with ballistic missiles, drones and booby-trapped boats, Reuters reported on July 16.

Since November, the Houthis have sunk two vessels and seized another. This has led to ships avoiding the shortcut of the Suez Canal and rerouting around the horn of Africa.

The much longer journey has negatively affected shipping times and port scheduling, leading to congestion in Asian ports, Anderson wrote. Low water levels in the Panama Canal, bad weather and labour issues in key ports have exacerbated the issue.

This has doubled the Baltic dry index, a global measure of dry bulk freight prices, and more than tripled the world container index, Anderson said—though shipping is still cheaper than in 2021.

Detours around Africa aren’t expected to end soon, said Anderson, but there are signs global port congestion will ease.

Shipping companies are adapting schedules to the new operating environment, with some redirecting to larger Asian ports, unloading shipments, and reloading onto smaller ships to continue to final destinations.

Water levels in the Panama Canal are returning to normal faster than expected due to recent rainfall. Daily transits are increasing and should be near the historic average by August.

“Fuel prices remain a wildcard considing they tend to respond to changes in oil prices and also to changes in inventory, which can be volatile,” wrote Anderson.

In July, U.S. crude oil inventories were down 19 per cent compared to the same month over the last five years. While this could support oil prices, “we’re not anticipating a surge any time soon,” Anderson said.

For Canadian agriculture, the possibility of domestic railway strikes remains the biggest threat to transportation costs, he added.

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The attacks by the Iran-aligned Houthis have disrupted global shipping since November and forced firms to re-route to longer and more expensive journeys around southern Africa.

“Just about all (dry bulk grain) vessels going from the Americas and western Europe are avoiding the Red Sea, the only exception is vessels going to Iran, they’re still taking the Red Sea route when shorter,” said Ishan Bhanu, lead agricultural commodities analyst at data provider and analysts Kpler.

“All vessels we are tracking going from the Black Sea to Asia are going through the Red Sea, almost without exception,” he added.

Grain transit through the Suez Canal hit a low of 2.6 million metric tons in February, down from 5.3 million tons in February 2023, Bhanu estimated.

The United States and other countries have sent naval vessels to protect civilian ships while the U.S. and UK have launched air strikes against Houthi forces, who say they are acting in solidarity with Palestinians against Israel’s military actions in Gaza.

“The Red Sea naval operation and air strikes have been going on for weeks now and it is pretty obvious that the Houthi attacks cannot be stopped easily by military means or that commercial ships can be given blanket protection,” said one grain trader booking vessels to export cargoes from Europe.

“Many ship owners are still willing to accept the danger to their ships and vessels still can be booked for Red Sea sailings. Chinese purchases of Ukrainian corn recently are expected to transit the Red Sea.”

–-Reporting for Reuters by Michael Hogan.

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“Another 13 vessels were diverted this week taking the total cargo diverted away from the Red Sea route to around 5.2 million metric tons of grains in about 90 ships since the attacks started late last year,” said Ishan Bhanu, lead agricultural commodities analyst at data provider and analyst Kpler.

About 7 million tons per month of grain cargoes usually transit the Suez Canal into the Red Sea, but bulk and other shipping has dropped significantly as Iran-backed Houthi militants have continued attacks on shipping despite U.S.-led air strikes on Houthi positions in Yemen.

“U.S. and European cargoes continue to avoid the Red Sea,” Bhanu said. “Not a single vessel in the Atlantic carrying grain to Asia is heading towards the Suez Canal.”

The Atlantic shipments would include large U.S. grain exports to Asia.

“Almost all cargo originating in the Black Sea, mainly exports out of Russia and Romania, continues to travel through Suez and the Red Sea,” Bhanu said. “Only three such vessels diverted to take the longer route among dozens sailing.”

Vessels in the Red Sea broadcast messages on the automatic identification system (AIS) to seek safe passage to show they are not involved in the Middle East conflict, including ships under Chinese ownership, he said.

Commodity traders said it was still possible to find bulk carriers for Red Sea grain shipments.

“There are shipowners willing to take the risk,” a German grain trader said. “But it is clear the air strikes and naval forces are not enough to end the attacks on ships in the immediate future.”

–Reporting for Reuters by Michael Hogan.

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About 7 million metric tons per month of grain cargoes usually transit the Suez Canal into the Red, but that has dropped significantly as Iran-backed Houthi militants have continued attacks on shipping despite U.S.-led air strikes on Houthi positions in Yemen.

“We calculate that another 12 vessels were diverted away from the Red Sea this week, carrying a total of about 700,000 metric tons of grain,” said Ishan Bhanu, lead agricultural commodities analyst at data provider and analyst Kpler.

“A total of about 4.5 to 4.6 million tons of grains cargo has avoided the Red Sea since December. We also saw more wheat being shipped from France and the Black Sea to Asia diverting away from the Red Sea.”

Many bulk carriers are still transporting grain through the region, however.

“A lot of vessels originating in the Black Sea are still taking the Red Sea route,” Bhanu said. “Diversion is more expensive for these vessels compared with those sailing from Europe or the United States.”

Commodity traders said it has become more difficult but not impossible to book ships for Red Sea sailings.

“It is hard but you can still find ships,” said one European grain trader involved in booking vessels for cereal exports to Asia. “Freight costs have risen and not all want to sail through the Red Sea even with a premium, but some will.”

One German shipping analyst said that some ship owners already operating in war-torn Ukraine are more willing to take the risk of traversing the Red Sea.

“Some vessels carrying Ukrainian grain exports to Asia are still transiting the Red Sea,” the analyst said. “These owners were already willing to accept the high risk to their ships and crews by loading in Ukraine.”

–Reporting for Reuters by Michael Hogan.

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“A big volume was (exported) in December… but the rate (in January) will drop,” Solsky told national television.

“There are problems in the Red Sea and part of our exports went and are going through the Red Sea to China, Asia and African countries and therefore the movement of ships has slowed down a lot,” he said.

Attacks by Iran-allied Houthi militia in Yemen on ships in the region since November have slowed trade between Asia and Europe and alarmed major powers. The U.S. has begun strikes on Houthi sites aiming to degrade their ability to attack shipping in the Red Sea.

Solsky said an additional reason for lower shipments was the New Year holidays.

Ukraine exported 4.8 million metric tons of food via its Black Sea corridor in December, surpassing the maximum monthly volume exported under a previous U.N.-brokered grain deal.

Prior to Russia’s invasion in February 2022 Ukraine exported about 6 million tons of food per month via the Black Sea.

It now relies on the corridor along its western Black Sea coast near Romania and Bulgaria, its small ports on the Danube River, and exports over land via eastern Europe.

Kyiv believes it has managed to dislodge Russian forces from the western part of the Black Sea, securing grain exports which are crucial to its economy as well as for important imports.

Wheat shipments plunge

Wheat shipments via the Suez Canal fell by almost 40 per cent in the first half of January to 0.5 million metric tons due to attacks in the Red Sea and Gulf of Aden, the World Trade Organization said today on social media platform X (formerly Twitter).

The WTO data, based on a dashboard developed jointly by the International Grains Council (IGC) and the World Trade Organization, adds to signs of ship diversions following attacks on vessels by Iran-aligned Houthi militants in Yemen.

Earlier this week, shipping sources had said they expected some grain cargo diversions but that most would continue to risk passing through the Suez Canal which is the shortest shipping route between Europe and Asia.

In December, around 8 per cent of wheat shipments from the European Union, Russia and Ukraine that would typically travel via the Suez Canal followed alternative routes, the WTO said.

That surged to around 42 per cent in the first half of January, it said. Prior to the attacks, the share of alternative routes was only about 3 per cent on average, it said.

However, it appeared that few if any shipments were being cancelled altogether. “The surging number of diversions appears to have had a limited impact to date on total deliveries,” the WTO said.

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Bearish production estimates for corn and soybeans from the United States Department of Agriculture’s (USDA) monthly supply/demand report released on Jan. 12 had major effects on prices, according to Jack Scoville from The Price Futures Group in Chicago.

“They increased yields for corn and soybeans in a rather significant way,” Scoville said. “The USDA really did increase demand, especially on the corn side, because of the increased production, but they didn’t increase demand as much as they increased production. That caught the market by surprise.”

While last week’s USDA report caused much of the weakness on the markets, improved weather conditions in Brazil put additional pressure on corn and soybean prices, according to Scoville. U.S. soybean and wheat exports are also less than what they were last year.

“There’s a lot of talk around Chinese demand for soybeans being 20 per cent less this year due to reduced hog herd sizes. That’s also hurting the soybeans,” he said.

Scoville added that wheat futures were also down due to lower prices for wheat exports from the Black Sea region. However, added shipping costs due to vessels re-routing away from the Red Sea amid recent missile attacks are also affecting markets.

“It’s something that we’re watching and we’re hoping that it’s figured out very soon, but so far, the Houthis continue to bomb very indiscriminately,” Scoville said.

He hopes for an uptick in demand in the coming weeks, while also paying attention to weather conditions in the U.S. and South America.

“If the weather becomes problematic in Brazil, it will be positive for prices and we have a whole growing season ahead of us,” he added. “Last year, we had a dry year and all sorts of problems. Those supported prices, as well. Mostly weather and demand are things to keep an eye on.”

March corn dropped to US$4.40 per bushel on Jan. 17, while March soybeans fell to US$12.03/bu. on Jan. 12. March spring wheat in Minneapolis also reached a new contract low of US$6.80/bu. on Jan. 17, while March Chicago and Kansas City wheat contracts were below US$5.80 and US$6/bu., respectively, for the first time since late November.

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man. 

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The BDI settled at 1,360 points on Jan. 15, dropping 59 per cent off the high of 3,346 points hit on Dec. 4, 2023, to trade at its lowest level in four months.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels – including capesize, panamax and supramax. It is often seen as a leading indicator of global economic activity.

A seasonal slowdown, reduced congestion at Brazilian ports and cancelations of some vessels headed from China to North America were all said to be contributing to the declining rates.

While bulk rates have fallen over the past month, container rates have shot higher. Drewry’s World Container Index (WCI), which tracks container rates, was at US$3,072 per 40-foot container on Jan. 11, 2024 – roughly double where rates stood at the beginning of December.

With more and more vessels diverting away from the Red Sea and taking lengthy detours there were reports of some shipping companies quoting rates as high as US$10,000 per 40-foot container from Shanghai to the United Kingdom, roughly quadruple levels only a week earlier.

Canada is at a freight disadvantage compared to its competitors exporting grains and oilseeds into many markets, with lower freight rates helping counter that disadvantage.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg. 

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Houthi forces in Yemen struck the U.S.-owned and operated dry bulk ship Gibraltar Eagle with an anti-ship ballistic missile, U.S Central Command said on Monday, although there were no reports of injuries or significant damage.

Dry bulk carriers are often used to transport grains although in this case the Gibraltar Eagle was carrying a cargo of steel products.

“This week’s attack is certainly viewed as an escalation by bulk carriers and owners. There is a great deal more concern, and I’m fairly sure it will divert much greater volumes, including grains, to other routes,” the head of the bulk shipping department at a German trade house said.

He was speaking before reports emerged of an empty Malta-flagged, Greek-owned bulk carrier also being hit by a missile on Tuesday while northbound in the Red Sea. There were no injuries.

Ishan Bhanu, Lead Agricultural Commodities Analyst at Kpler, said about seven million tons of grains moves through the Suez Canal in an average month but now about 20 per cent of the cargoes were being diverted around the Cape of Good Hope.

“This number was closer to 10 per cent ten days ago, but we have seen more diversion decisions being made in the last few days. Soybeans from the U.S., wheat from Europe and rapeseed from Australia are mainly affected,” he said.

A senior grain trader at a German trade house dealing with Asia said they were still shipping through the Red Sea but were watching the situation closely.

“There has been no impact for us yet. But I say yet.”

Rerouting appeared to be affecting a large program of French wheat exports to China that started in December.

Among 12 wheat cargoes to have left France for China since last month, five had travelled through the Suez Canal and Red Sea while seven were taking the longer route around Africa, including two that had turned back in the Mediterranean, LSEG shipping data showed.

France is the European Union’s largest wheat exporter and China has become a major destination in recent seasons, particularly as France has lost market share in Algeria.

–Reporting for Reuters by Nigel Hunt in London, Michael Hogan in Hamburg and Gus Trompiz in Paris.

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U.S. and British warplanes, ships and submarines launched dozens of strikes across Yemen overnight, retaliating against Iran-backed Houthi forces for attacks on Red Sea shipping, widening regional conflict stemming from Israel’s war in Gaza.

Most container ships already were avoiding the nearby Suez Canal, a shortcut between Asia and Europe that handles 12 per cent of global trade. Now, U.S. and UK militaries have advised all ships to steer clear of the conflict zone. That stoked fears that rates for oil tankers and bulk carriers that ferry vital commodities could surge, raising the risk of a new round of global inflation.

The benchmark Shanghai Containerized Freight Index was up over 16 per cent week-on-week to 2,206 points on Friday. The index, which measures non-contract “spot” rates for container shipments out of China’s ports, has gained 114 per cent since mid-December.

Rates on the Shanghai-Europe route rose 8.1 per cent to $3,103 per 20-foot container on Friday from a week earlier, while the rate for containers to the unaffected U.S. West Coast soared 43.2 per cent to $3,974 per 40-foot containers week on week, leading ship broker Clarksons said on Friday.

“The longer this crisis goes on, the more disruption it will cause to ocean freight shipping across the globe and costs will continue to rise,” Peter Sand, chief analyst at freight platform Xeneta, said in Friday.

Major players in the ocean shipping industry that handles upwards of 90 per cent of global trade are bracing for months of cost-stoking upheaval.

“Even if from today forward the Bab al-Mandeb Strait was to become safe and secure for transit, we expect it will take a minimum two months before vessels could assume normal rotational patterns,” said Michael Aldwell, executive vice president for sea logistics at Kuehne + Nagel KNIN.S.

Major container ship owners such as MaerskMAERSKb.CO and Hapag-LloydHLAG.DE have switched Suez Canal-bound ships to the longer route around Africa’s Cape of Good Hope. That has sent delays cascading through complex vessel schedules. Rates have at least doubled from a month ago on the most affected routes but remain below the pandemic’s record highs.

On Friday, four oil tankers turned around mid-voyage to avoid the Red Sea and five others either made diversions or paused navigation.

“Tanker rates will increase and futures are up this morning,” said John Kartsonas, managing partner at Breakwave Advisors, who added that dry bulk remains the least affected sector.

Major importers like Tesla, Geely-owned Volvo Car VOLCARb.ST and Ikea already have reported product shortages or warned of late-arriving goods.

Rerouting a ship around Africa adds roughly 10 days and $1 million in fuel costs for each one-way voyage between Asia and Europe.

Carriers are pulling vessels into the most affected European and Mediterranean trade lanes to compensate. That is reducing available vessel space for cargo moving on Transpacific and North-South routes and sending rates higher, Jefferies analyst Omar Nokta said in a note on Friday.

Vessel operators also are rolling out Red Sea-related surcharges and rationing less expensive, contract-rate space – forcing some customers’ shipments into the pricier spot market.

“The price of a vast range of goods threatens to march upwards again,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

–Additional reporting for Reuters by Siddharth Cavale.

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