Rising tensions overseas is expected to bring a challenging trade period for the agriculture sector, where attacks on ocean shipping companies are upsetting trade logistics. 

The export of canola and imports of fertilisers, chemicals, and machinery parts are expected to be impacted by tensions in the Red Sea, as trade is diverted to another, more costly route. 

RaboResearch general manager Stefan Vogel said that attacks by Houthi militants in the Suez Canal are forcing vessels to take alternative routes, costing more time and money. Canola in particular will be impacted, which is usually shipped through the canal to the EU. 

“Globally, for containerised and bulk goods, the shipping industry has to make tough decisions at the moment - either to navigate the Suez Canal and risk severe attacks by Iran-backed Houthi rebels or to take a nine to 15-day detour around Africa’s Cape of Good Hope,” Mr Vogel said. 

As a result, imports are also expected to climb in costs, although they are not expected to reach the costs seen in 2021 during Covid-19.

Nitrogen and phosphate fertiliser supplies aren’t expected to be impacted, while the journey that potash usually takes could see price hikes. 

RaboResearch general manager Stefan Vogul believes the conflict could be advantageous to some parts of Australian trade. (Supplied)

While producers are likely to be impacted, Mr Vogul said it’s not all bad news, particularly for wheat and barley markets. 

“The canal issues might help Australian wheat and barley shipments to be slightly more competitive into destination markets in Asia, the Middle East and eastern Africa.”

“This is because our key competitors from Russia, Ukraine, the EU and even the east coast of the US will struggle to get to these destinations as they usually pass through the Suez Canal, while Australian grain does not,” Mr Vogul said. 

Mr Vogul said that price hikes seen in 2021 aren’t expected to be reached again in 2024, nor is the container shortage that significantly impacted Australian exports. 

“The good news is container freight rates at the moment are still three to four times below the massively Covid-inflated levels of 2021,” Mr Vogel said. 

“Imported goods into Australia will have to bear the higher freight costs, but container freight is unlikely to get as expensive as in 2021.” 

It remains to be seen the entire impact on the diversions on the market, although if the Red Sea conflict isn’t resolved soon, it is forecasted to have a much more significant impact.