On March 9, Asia’s corn import prices reached $271 per metric tonne, marking their highest level in nearly three years. This price surge follows an increase seen last on July 26, 2023.

The upward trend has been significantly fueled by a $10-per-tonne rise in freight rates, largely influenced by the recent escalation of conflicts in the Middle East.

This situation was intensified by the effective closure of the Strait of Hormuz after a U.S. and Israeli strike on Iran on February 28, which resulted in the death of Iranian Supreme Leader Ali Khamenei.

Since then, the conflict has rapidly spread to various countries, including the United Arab Emirates, Qatar, Saudi Arabia, Kuwait, and Turkey. A crucial consequence of this unrest is the blockage of the Strait of Hormuz, a vital passage for oil and gas exports.

The disruption has tightened global fuel supplies, causing bunker fuel prices to surge. This, in turn, has escalated freight rates for bulk vessels transporting corn from leading exporters like the U.S. and Brazil.

“Marine fuel bunker prices have more than doubled since the closure of the Strait of Hormuz. Given that bunkers are the primary fuel for bulk vessels ferrying corn to Asia, these higher fuel costs have led to increased freight rates,” stated Edward Low, a price reporter for agriculture and food at S&P Global Energy.

According to the company, freight rates have surged by over $10 per metric tonne since February 28. Many traders have also reported challenges in securing shipping services due to anticipations of further fuel price hikes.

Impact on Corn Markets in Asia

Currently, feed millers across South Korea, Japan, Vietnam, Taiwan, and Malaysia are adopting a cautious “wait-and-see” approach, having secured their supply needs through June and some having started purchases for July shipments before tensions escalated.

Low noted that supply availability from major origin markets like the U.S. and Argentina remains strong, indicating that freight costs may delay further purchasing.

Ultimately, as the conflict prolongs, buyers will likely be compelled to accept higher import prices. “Feed millers will have to bite the bullet and adjust to these elevated corn prices if they wish to keep their operations running,” Low remarked, highlighting a Singapore-based trader’s perspective that late April and May might compel millers to revise their purchasing strategies.

The ramifications of this conflict extend to agricultural inputs, particularly fertilizers, a key supply from the Middle East. Persistent disruptions in the Hormuz Strait are likely to render fertilizer procurement both challenging and costly.

“Countries like Brazil, which are leading producers of grains and oilseeds, are reliant on Middle Eastern fertilizer supplies and could quickly experience increased crop prices,” emphasized Low.

Conversely, China appears less vulnerable in the short term due to its strategic stockpiles, while U.S. farmers benefit from robust domestic production.

“However, the ramifications will ripple through global corn prices as the conflict continues and the Strait of Hormuz remains largely ineffective for transport,” Low concluded.

Looking ahead, elevated crude oil prices are expected to continue exerting upward pressure on soybean and corn markets.

“Analysts at S&P Global CERA believe that heightened crude oil prices could lead to an uptick in soybean and subsequently corn prices. Additionally, inflation concerns may channel more managed money into agricultural commodities,” Low noted.

“However, this potential for price increases is counterbalanced by the risk of a slowdown in global trade as shipping costs rise due to the need for rerouting away from conflict zones. Ultimately, the extent and duration of the ongoing conflict will be pivotal in shaping the future of the corn market.”