Delivery times are lengthening and shipping costs are rising for U.S. farm exports due to drought that has slowed traffic in the Panama Canal and attacks by militants on cargo ships in the Red Sea, said analysts on Tuesday. “These issues have not only underscored the fragility of key maritime routes but also have had a cascading effect on global agricultural supply chains, having the potential to disrupt 2024 U.S. agricultural exports severely,” they said.
More than 26% of U.S. soybeans and 17% of U.S. corn exports transited the Panama Canal in the fiscal year ending on Sept. 30, 2022. The major shipping season for U.S. farm exports begins in October with the fall harvest and runs through May. “Persistently low water levels at the Panama Canal could significantly impact these exports,” wrote Sandro Steinbach and Yasin Yildirim of North Dakota State University and Xiting Zhuang of the University of Connecticut on the farmdoc daily blog. If ships bypass the canal and go around Cape Horn, voyages take an additional two weeks, with higher costs.
Ship traffic in the Red Sea has declined steeply as a result of attacks by Houthi rebels. Rather than use the Suez Canal, shipping lines are routing cargo around the Cape of Good Hope. “A direct consequence of the blockage has been the surge in ocean freight rates,” they said. “The crisis has led to notable delays in shipping schedules” of up to three weeks.
“Given these conditions, the 2024 outlook suggests continued challenges for U.S. agricultural exports, particularly for critical commodities such as corn and soybeans. These uncertainties will require stakeholders to adapt to the increasingly uncertain global market environment,” said the analysts. “This adaptation may involve diversifying logistical plans, exploring alternative shipping routes, adjusting schedules, and possibly seeking new markets to mitigate the risks of reduced canal capacity and disruptions in key shipping lanes.”