Logistics, not supply, now drives global food prices
“Global agricultural markets entered the current conflict with record-high stocks and historically loose supply balances,” said Vijay Chakravarthy, chief risk officer at Louis Dreyfus Company. He was speaking at the Commodities Global Summit in Lausanne on 21 April 2026, adding that there were “no real constraints, except for tariffs.”
Global grain and oilseed supplies are ample but poorly distributed, with stocks concentrated in producing countries, explained Louisa Follis, director and head of dry cargo analysis at Clarksons. The real bottleneck is logistics—especially shipping—where higher freight costs are driving prices higher despite ample supply.
Iran’s other strong card
Beyond logistics and supply imbalances, geopolitical risks are increasingly shaping trade flows. “Funnily enough, Iran is least vulnerable to disruptions in agricultural imports,” stated Chakravarthy. He noted that Iran has a 25% import dependency compared with 70% to 95% in GCC countries.
Logistics disruptions in the Gulf are raising costs and complexity, pushing GCC countries toward stockpiling. Chakravarthy warned of a potential “investment drought” as capital is diverted from discretionary areas into securing essential minerals, chemicals, and food security.
Countries that previously lacked a culture of stockpiling now feel the responsibility to secure their own citizens’ needs, contributing to rising tensions—most notably between the US, China, and India.
Experts suggest that the world is moving from a supply-driven market to one where geopolitics is the “dominant force.” The “geopolitical fragmentation” currently observed is unlike the temporary “hump” of the pandemic; it represents a lasting shift toward “supply chain sovereignty.”
Input competition squeezes fertiliser supply
A central theme is the vulnerability of major producers to fertiliser imports. Chakravarthy highlighted that Brazil, which has dominated export share growth over the last two decades, maintains an 85% dependency on imported fertilisers. A reduction in yield of 30% to 50% in such a fertile region would have “enormous consequences” for the global feed and food chain. Chakravarthy noted that “we have already seen price increases on beef imports in Europe and the US.”
This is exacerbated by a “pecking order” problem: agricultural inputs like sulphuric acid are increasingly rationed, with fertiliser manufacturers often outbid by copper smelters or battery manufacturers who can afford higher premiums.
Freight costs surge on fuel and delays
Follis explained that bunker fuel prices (marine fuel used by ships) have caused grain freight rates to rise by 50% to 60%. Furthermore, competition for slots at the Panama Canal has left bulk carriers “at the back of the queue” behind product and crude tankers going from the Gulf to Asia.
This disruption is particularly significant for US farmers, who are already struggling to compete with Brazil. Many are now diversifying into smaller emerging markets in West Africa and South America, rather than China, to offset cost pressures. “South America has the advantage of having the ability to fill in where the US has pulled out,” said Follis.
To mitigate fuel expenses, many vessels have “slowed right down,” which, while reducing emissions, effectively squeezes fleet availability and introduces systemic inefficiencies pushing freight rates higher, according to Follis.
War disrupts traditional hedging tools
Hedging models are under strain in the current war-driven environment, with many instruments breaking down. While still relevant, they are less reliable—especially for fuel costs such as bunker fuel—making physical supply security and strong relationships more critical than financial hedging alone.
New trade routes bypass US system
This shift is also eroding the traditional dominance of the US. The centre of gravity is moving toward Brazil and Argentina, with Brazilian soybean production reaching what Chakravarthy described as “extraordinary” levels of around 180 million tonnes.
While US-centric pricing benchmarks and the dollar remain the global standard for now, Chakravarthy suggested that within a decade, we may see trade flows, such as those between Brazil and China, benchmarked and priced in CNY, bypassing US financial systems entirely.
Rising rates and debt threaten food supply
Public finances are far weaker than during past crises, with G7 debt above 100% of GDP and higher borrowing costs. This is squeezing profitability across the supply chain.
In Brazil, the cost of debt for farmers has reached 15%. This high-interest rate environment, coupled with a tightening credit cycle and rising input and labour costs, is eroding profitability. This reduces incentives for farmers and for small and medium-sized firms whose net profits are being eroded by debt servicing.
Winter is coming
Ultimately, the market has not yet fully priced in a prolonged dislocation. While the current timing has been “forgiving” for some crops, a continuation of the conflict for another six months could make 2027 a critical year for global food security, particularly for winter wheat.
