Middle East conflict keeps Asian agricultural markets on edge

Escalating conflict in the Middle East is keeping Asian traders on alert, as concerns grow over potential increases in freight costs and logistical pressures on key agricultural commodities, including grains, chicken and beef, market participants said.

Asian grains market participants are largely taking a wait-and-see approach.

"Freight is not helping for any trades," a Singapore-based trader said, while a Japan-based trader said, "It is too early to tell, but the only change is the bunker price for now."

A Singapore-based grains purchaser said, "Ocean freight was already up $2/metric ton last Friday [Feb. 27] even before the US-Iran escalation, likely more this week as war risk surcharges and premiums are added into the equation ... We need to closely monitor biofuels [sugar, corn, soyoil and palm] as well as fertilizer prices as US farmers enter a new planting season."

"Everyone wants to wait and see at the moment ... I think the attack itself is already reflected in the market, but no one can predict how long it will affect [the market]," another Singapore-based grains trader said.

Despite the geopolitical conflict, actual grain shipments to Asia have not yet been disrupted. Northeast Asian buyers continue sourcing corn from the US Pacific Northwest, while Southeast Asia imports from South America, according to market participants.

Traders said while shipments are not blocked, rising bunker costs and potential route disruptions in the Gulf could push freight costs higher, indirectly affecting landed prices.

Platts, part of S&P Global Energy, assessed corn CFR Northeast Asia at $252/mt on March 2, up $1/mt day over day.

Soybean crush margins pressured

The Asian soybean market also felt the impact of the Middle East war.

In the soybean complex, China's soybean demand was weak as poor negative crush margins have plagued short-term buying interest. The escalating conflict in the Middle East has further squeezed China's soybean crush margins amid rising freight costs, which have continued to steer buyers from the market.

"There were very few Chinese buyers to begin with. Now, with the rising ocean freight costs and poor domestic crushing margins, buying interests from end-users become even thinner," said a Chinese soybean trader.

The freight cost for the April shipment on the Santos-to-North China route was $49/mt, up $5/mt week over week, two Asian soybean traders said.

According to a Chinese broker, rising energy prices are likely to support bullish momentum for soybean oil and soybeans, as overall soybean costs climb further.

Platts assessed the soybean CFR China M1 flat price at $470.69/mt on March 2, up $1.29/mt day over day.

Protein traders cautious

Market participants in the chicken and beef sectors are reassessing trade plans as uncertainty around key shipping routes raises questions about costs, timing and price transmission to buyers.

Singapore-based chicken importers described the situation as uncertain, saying that Brazilian exporters are currently adopting a cautious stance. They expect more clarity on shipping conditions by midweek.

"Not a direct impact on shipment here. Currency rates and oil prices are increasing rapidly. Not seeing any other direct impact other than those two yet," a Seoul-based meat importer said.

A Tokyo-based exporter said, "I don't think there is an impact. The Japanese market buys boneless chicken legs from Brazil, and the Middle East buys grillers. Japan doesn't compete, doesn't follow the situation, in my opinion."

Indian beef exporters also saw heightened caution. A Mumbai-based exporter said, "Since it is the first few days, there is still confusion ... However, if the conflict persists for some time, freight rates will increase, along with insurance costs."

Another exporter in India's Uttar Pradesh state said trade routes passing through the Strait of Hormuz remain a major concern for shipment planning.

Market participants said the coming days will be key for gauging how higher freight rates and insurance premiums may translate into prices for Asian buyers of grains and animal proteins. Currently, most traders are holding off on major purchases until more clarity emerges.

Platts assessed chicken leg CFR North Asia at $3,200/mt on March 2, up $75/mt day over day.