Recent military escalation has created uncertainty across global energy markets, shipping routes, and commodity supply chains. While markets currently anticipate a contained conflict, the situation remains fluid and could have broader consequences if disruptions to energy exports, fertiliser trade, or maritime transport routes persist or intensify.
Given the highly interconnected nature of poultry production and trade, developments affecting energy markets, fertiliser availability, feed production, and logistics can have cascading impacts across the global value chain, from primary production through processing and international trade.
Energy Costs and Production Economics
Energy markets are typically the first to react to instability in the Middle East due to the region’s central role in global oil and gas supply.
The Strait of Hormuz, a key maritime chokepoint through which approximately 20% of global oil exports pass and 20% of Liquefied Petroleum Gas, has become a focal point of concern. Disruptions or increased shipping risks are raising global oil and natural gas prices.
Higher energy prices affect poultry production globally by increasing:
1) Heating and electricity costs in poultry houses
2) Processing and refrigeration expenses
3) Transport and logistics costs across supply chains
4) Packaging and input costs
While current oil prices remain below the spikes seen during the Ukraine crisis, although price pass-through to pump takes 1-2 weeks, sustained volatility could still increase production costs for producers worldwide.
Fertiliser Supply and Feed Production
The Middle East is also a critical hub for fertiliser trade. Roughly one-third of global fertiliser shipments, including sulphur and ammonia, transit through the Strait of Hormuz.
Fertiliser markets are closely linked to energy markets because:
1) Natural gas is a primary input for nitrogen fertiliser production
2) Sulphur is largely a by-product of oil and gas processing
If energy exports from the region are disrupted, fertiliser production and distribution could be affected simultaneously. This would have downstream implications for crop production, particularly maize and soybean crops that are essential to global poultry feed.
Timing is especially critical during planting seasons in the Northern Hemisphere. Delays or shortages could lead to:
1) Higher fertiliser prices
2) Reduced fertiliser application
3) Lower crop yields
4) Increased feed costs
Countries heavily reliant on imported fertilisers, including major feed producers, may be particularly exposed.
Trade and Supply Chain Disruptions
The conflict is also affecting poultry trade logistics and supply chains.
Early industry reports indicate:
1) Breeding stock shipments being rerouted to avoid Middle Eastern transport hubs
2) Increased transit times and logistical uncertainty (e.g. Cape of Good Hope reroute adds approx. 10- 14 days)
3) Potential disruptions to supply in markets dependent on imported genetics
Should the conflict escalate, additional risks could include:
1) Higher maritime insurance premiums, with some companies already withdrawing coverage
2) Shipping delays through key trade routes
3) Increased freight costs for feed and poultry products
Given the globalised nature of the poultry industry, these disruptions could affect multiple segments of the value chain - from breeding and feed supply to processing and export markets.
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