From Hormuz to Gulf ports: tracing a logistics shock through the poultry trade

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Karan Dadure:

The Middle East imports the majority of the chicken it consumes. The production within the regions falls well short of demand and the gap is filled largely by Brazilian frozen poultry. That reach Gulf polls through the Strait of Hormuz. The structural dependency of a single primary origin, a single primary route is the context of what we are about to examine today. Between early February and mid-April of this year, the Platts CIF Middle East chicken breast assessment moved from $2,320 per metric ton to $3,150 per metric ton, a 36% increase over eight weeks. The cause was not a change in production. It was not a change in consumption. It was a disruption to the route itself.

In this episode, we will look at how the disruption traveled through the freight market, through the chicken market, and into the longer analytical picture that sits behind both. Welcome to Platts Commodities Focus. I'm Karan Dadure, price reporter for agriculture and food teams at Platts, a part of S&P Global Energy, covering the Middle East poultry market. I'm joined by Arif Islam, Platts price reporter, covering shipping trade across Europe, Middle East, Africa region, and Magda Michalik, principal analyst for the European poultry market for S&P Global Energy. A quick one on structure, we are going to walk through this roughly chronologically, the disruption, what it did to freight and what it did to chicken.

And then Magda will help us connect the dots into the longer pictures because it isn't over yet, even the prices are coming down. So, let me set the scene for the poultry side. The Middle East is one of the most import-dependent region for poultry in the world. The region brings in roughly 1.2 million metric ton of chicken a year. Brazilian alone supplies around 745,000 tons, close to two third. The rest is split between Turkey, the United States, China and other, but in much smaller volumes. And the important part is how does the chicken actually reach the region? Most of it arrives at the Gulfport, Jebel Ali, Daman, and Jeddah, one of the ports. To get there, vessels have to pass through the Strait of Hormuz.

Jeddah on the Saudi West Coast is one major exception. We can talk about it later. For most of this region, Hormuz is the route. So, when the route is disrupted, the entire import flow into the Gulf is disrupted. Through February, the market was actually quiet. Brazilian frozen breast CF release was assessed at 2,320 to 450 per metric ton. Buyers were well stock ahead of the Ramadan. Liquidity was thin and importers were actively avoiding forward commitment because anything shipped in March or April would arrive into the summer slowdown window.

Then early March, the disruption start and the first price reaction wasn't the spike. The market essentially went silent. Brazilian suppliers stopped distributing prices less to Middle East buyers altogether. Participants were telling us the shipping into the lower Gulf had dropped close to zero. One UAE based trader described the situation to us as a very unstable from the day one. And I'm quoting, "Logistic will come under pressure if the conflict drags on, creating a demand supply gap and ultimately higher prices due to surcharges, scarcities and shipment delays." That all turned out to be true.

So, instead of the price jumping immediately, the market went into a holding pattern, people managing inventory rather than committing to new trades. Arif, from the freight perspective, what was actually happening on those routes on those first two weeks? Because I think the listeners were worth understanding that market when silent actually means operationally.

Arif Islam:

So, yeah, that matches exactly what we were seeing. The first phase wasn't about cost, it was about the complete uncertainty in routing. Maersk's news comes a day after major container lines such as MSC, CMA, CGM, and Hapag-Lloyd also suspended all transits through the strait of Hermes, ordering vessels inside or approaching the Gulf to seek shelter while still rerouting Suez-bound services via the Cape of Good Hope. DP World, which operates within Jebel Ali was unusually direct about it. The CEO said in a recent regional geopolitical developments have reduced inbound vessel traffics into Jebel Ali. So, this wasn't just sentiment, it was the main UAE pool confirming the slowdown in plain language.

The intra-regional freight market reacted first and the hardest. Platts's West Coast India to Middle East Assessment PCR33 went from $80 per TEU on February 27th to $700 per TEU on March 3rd. That's a 775% move upwards in five days. By March 19th, the same route was assessed at $3,600 per 44 container up 1,210% from pre-war levels. The long-haul rates moved to the North Asia to North Continent route jumped 36% in a single day to $3,000 per 4E4 container and the Mediterranean route hit $4,200. At the peak of the disruption, we estimate around 130 container ships were stranded, roughly 1.5% of the global container capacity directly being affected.

But here's the critical point and Magda, this is where I wanted to hand it over to you. Now the move wasn't just driven by demand, it was driven by emergency bunker surcharges, war risk premiums, and cost recovery. The product was still available. The freight was repricing the different problem.

Magdalena Michalik:

Yeah, Arif, I think you were exactly spot on this. I would say the key point here is that this wasn't a supply shock, this was a logistics shock. So, in this case, the product which is chicken was still available globally and Brazil was still producing at a really high level. The problem here was that getting the chicken to the Middle East was difficult efficiently and at a workable cost. What we typically see in these situations is that the market reacts to the disruption risk almost immediately before any actual physical shortage materializes. Then prices will start adjusting based on expedited delays, rising costs and uncertainty, not because the product isn't there physically.

And this is really important in this case because it will determine how the price is going to move and eventually unwind. A supply shock would eventually leave a permanent dent. A logistics shock would gradually fade when the situation normalizes. I think what is really important flagging here as well is the response pattern from the buy side. Companies will move for the free phases in order. So, first they will lean on inventory, then they will begin to adjust their prices and they will move to the third phase only if the disruption sustains long enough and then they will restructure their supply chains.

And I think the Middle East posting market is a really good example of all the free phases. Inventory was the buffer for February and early March, which is why prices barely moved at first despite the headlines. Then pricing adjusted from mid-March when the Fred cost layer became a bit too big for the inventory to absorb. And then the third phase, which is the supply chain restructuring, is actually going to unfold now, but we can come back to that because this is where the longer story sits.

Karan Dadure:

That's a really useful way to put it, Magda. It's really helped to explain why the poultry prices didn't move much at first. Even after the disruption began, inventories gave the market a bit breathing room and the buyer still had cover. But by early approval, the cushion was running thin and the freight cost was no longer something in Puerto Rico and the numbers are still striking. Brazilian breast, fundamentally, the FOB origin prices haven't really changed. We were hearing 2,400, 2,600 ton at origin, but logistically layering on top of transformed the delivery cost. Cargoes were being rerouted via Jeddah, Sohar, Khorfakkan and Gujarat. Even some floors were taking longer routes.

So, the transshipment from Oman to UAE was costing around $8,000 per reefer container. Inland freight from Jeddah was roughly around $240 per metric ton. Total war logistic burdens changed the destination charge and war surcharges. Inland transportation in some cases ran close to $12,000 per reefer container. So, Brazilian breast hits 3,150 per metric ton CIF market for 13 April to 15 apron. That was the cycle's high. And to quotes from the floor really capture the mood at the point, one seller said the Brazilian export sum up the adoption phase, Magda, just describing everyone will find a way to send it to Jeddah and bring it from there.

One buyer said the UAE trader told us the containers were full and waiting on the port for clarifications regarding the Strait of Hormuz. The tail says exactly why the spike was self-limiting. The supply chain had found workables. The imports had covers. Nobody on the other sides was going to chase the market higher. Arif, on the free side, the same pattern must have been playing out, but then something surprising happened in May, didn't it?

Arif Islam:

Yes, April and May tell completely different stories. In April, the freight market was actually weakened. The Hormuz disruption had triggered a cost-driven spike, but once that flowed through, there was an underlying demand to hold the rates up. Routes through Khorfakkan and Gujarat became more established as workarounds were assessing the Khorfakkan to Jebel Ali lead at around $1,400 per container, which was a lot more workable than the Sohar route. Carriers regained some operational consistency and the headline softened. By mid-April, we were assessing the North Asia to North Continent route back around 2000 to 2,200 per 40-foot container.

What carriers was even described the pricing environment as irresponsible? So, effectively, the Hormuz spike on the long-hauled side was given back. But then by May, it surprised everyone. And this the part I think is the most interesting because the second search had nothing to do with the Middle East. Shippers started advancing Christmas cargo orders by three to four months. They were trying to avoid a repeat of the 2025 peak season disruptions. Compiled that with blank-sating programs from carriers and equipment shortages, we got a genuine space crunch. The North Continent route went from $2,100 at the end of April to 4,100 by the end of May, showcasing a 95% move in a month.

The Mediterranean was hit at $5,200. And by mid-June, we were assessing the North continent route at $5,000 and the Mediterranean at $6,200 period highs. One carrier source flagged a structural driver worth watching was demand for AI-related technology and renewable energy cargo, which is now part of what keeping the containers tight. So, the frame market has moved well beyond the original Hong Yu story.

Karan Dadure:

Yeah, Magda, this is where I want to bring you back because the fleet side has had its spikes, its corrections, and then now a second search. The chicken side had come off its high, but there's a slower stories still developing in the backgrounds that matters for Middle East protein. Walk us through it.

Magdalena Michalik:

Yeah, Karan, I think there is something else that's being underplayed when people look at the Middle East chicken market, but I think let's go back a little bit to the trade data because I think it's going to tie in very well with what we've been talking about. The UAE chicken imports in March were down around 40% from last year. And at the same time, Brazil's poultry exports in the first quarter of 2026 hit a quarterly record of almost one and a half million tons. So, what this is telling us is the Brazilian supply was actually very strong, but what probably hit the UAE chicken imports was the ability to land that supply at golf ports at a workable costs.

And I think this is probably the main data that points us to the fact that this is a logistics shock. But at the same time, a very similar dynamic affected European exporters. Vessels were rewarded via the Cape of Good Hope, which would've added 10 to fortune days to voyages and then raised costs and reduced European competitiveness in key export markets. So, this wasn't really the Middle East story in isolation because it was more of a global protein trade story within the Middle East at the center because of that import dependency.

But if we go a bit forward-looking, I think what Karan mentioned at the beginning is that the Middle East sources most of its chicken from Brazil and Brazil is one of the regions that is most exposed to the broader fallout from the disruption because of a different channel, not only for fried, but for the input costs. Brazil is heavily reliant on important fertilizer, particularly nitrogen and phosphate, and their prices have been under the pressure since February. Margins on consolidated land are compressed and margins on expansion land are starting to turn negative.

And what this means in practice is that S&P Global Energy have reduced its Brazilian soybean production forecast for the '26-'27 season to 177 million tons with a bias toward fervor cuts. We've all have taken the Brazilian corn area down by 100,000 hectares for the next season. Now let's bring this a little bit together because the soybean meal and corn are the two main inputs in the chicken feed. So, even when fright normalizes and the immediate logistic shock is behind us, the input cost layer for Brazilian poultry production will be the next thing to watch because it will eventually show up at Jebel Ali and Khorfakkan as the higher origin price of Brazilian poultry.

So, I think how we should think about this shock is that it will operate in three different timelines. First, there will be the fried timeline, which will play out over weeks as logistics adjust. Then there will be the chicken price timeline, which will take a couple of months because of the biological production cycles will limit how quickly supply can respond. And then there will be the Brazilian input cost timeline, which will unfold over seasons as feed costs and planting decisions will work their way for the supply chain. So, I think the discussion is no longer just about the immediate shock of the logistics.

The market will be increasingly focused on what's going to happen next, which is how resilient the supply chain really is when the pressure persists across multiple parts of the system at the same time.

Karan Dadure:

That's an important fact, Magda, because in the near term, the Middle East chicken story have already done, and we should walk through that. Through me, sellers were repeatedly trying to push breasts back towards $3,000 per metric ton. Offers were as high as 3,100 CFR Khorfakkan and so hard, but buyers won't bite. One trader put it simply, the Middle East is really slow at the moment. Eid al-Adha added a seasonal demand lull and by late May prices were back to 2,940 per metric ton. The most recent assessment was 7th July and the prices were around 2,810 metric ton. That's at $90 for the weekly drop. The biggest one day we can see was on six June at $60 drop.

The trade is supported lower values, logisticals were more predictable, and bars were firmly in the driver's seat now. One more pace of the color worth flagging during the period were started seeing small but notable volumes from other origins, mainly from China. China's entering the UAE. The numbers are small in absolute terms, but Brazilian suppliers are watching them because Brazilian origin costs keep rising and the way Magda's outlook suggests that's create room for new origins to take share in the market that have been overwhelming by Brazilians for years. And that's exactly the supply chain restructuring Magda described in our third phase.

Let me wrap with the round table. If we had the same conversation in three months from now, what's the single indicator each of you would be watching most closely? Arif, you first.

Arif Islam:

So, for me, it's the trajectory of blank savings programs through Q3 and what carriers do with peak season surcharges. Maersk has already revised its peak season surcharge to 1,500 per 40-foot container from July 7th. And if AI and renewable cargo holds up and carriers maintain capacity discipline, this could extend much later than usual.

Magdalena Michalik:

I think from the analytics side, we will be watching the Brazilian fertilizer import volumes over the next quarter, and this will be the leading indicator for whether Brazilian feed costs will stay elevated going into the 26th, 27th season. If those imports stay weak, we'll see it show up in feed prices and eventually in Brazilian chicken export offers.

Karan Dadure:

And from my side, I will be watching close to other origins, mainly Chinese chicken volumes into the GCC and whether the local import prices gap in the UAE compress back to historical levels or stay at the widened spread we have seen in March. That tell us whether this whole picture's tax has reset highest or whether we're just traveling back to where it started. Thank you both of you. Before we move on, this is a good moment to mention to our listeners that we have just re-released our Platts Atlas of Food indisciplined guide to the global trade and some of the biggest global agriculture commodities.

It includes the sections on proteins where you can learn more about trade flus and fundamental affecting pricing of chicken, pork, beef, and shrimp. You can also find a wealth of information there on key crops like wheat and soybean, and we have just added a new section on sugar. We'll put this link in the show notes. Thank you for listening. You can find our daily assessment of Middle East poultry EMEA containers and our short reports on our crop analysis on S&P global energy platforms. This Platts Commodities Focus podcast was produced by Chandreyee Mukherjee from Gurgaon. Thank you for listening.