Attacks In The Red Sea Are Now A Nightmare For Shippers. Here's Why It Could Actually Open The Door For More Exports Of U.S. Corn
AgDay 01/08/24 - Red Sea Shipping Issues
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 on Tuesday, 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.”
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,” says 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.
