Insight Focus
Global food prices fell for the third consecutive month in November. US soybean shipments to China are moving, but the US now expects its trade commitment to be fulfilled only by February 2026, as Trump announces USD 12 billion in aid for farmers. Black Sea conflicts and Ukrainian strikes on Russian maritime assets have sharply increased war-risk premiums, raising shipping costs and disrupting crude exports from the region.
As Food Prices Fall, Rate Cuts on Horizon
World food commodity prices fell in November, marking the third consecutive month of decline, according to the Food and Agriculture Organization of the United Nations (FAO).
The FAO Food Price Index, which tracks monthly changes in international prices for a basket of globally traded food commodities, averaged 125.1 points in November—down 1.2% from October. The index now stands 2.1% below its November 2024 level and 21.9% lower than its peak in March 2022.
While the FAO Cereal Price Index rose 1.3% in November, reflecting strong harvests in Argentina and Australia, overall food prices were tempered by falling quotations for vegetable oils, dairy, meat and sugar.
Source: FAO
This comes as central banks in the US and the UK are expected to cut interest rates in the coming weeks. The US Federal Reserve is projected to lower rates by 0.25 percentage points to a target range of 3.75–4%, while the Bank of England may reduce rates from 4% to 3.75%.
Analysts have cited economic growth and employment trends as factors influencing these decisions. The actions are being closely monitored by markets and policymakers for their potential implications on financial conditions and trade.
More US-China Soybean Shipments Reported
US soybean shipments to China are finally moving after the late November surge in bookings. At least six bulk cargo vessels are scheduled to load at Gulf Coast terminals through mid-December, with a seventh cargo already en route—the first shipment since May. Vessels currently preparing to load include the Tokugawa and Katagalan Brave, with four additional ships expected in the coming weeks. US sorghum exports to China have also resumed.
Cranes loading soybeans onto a cargo ship
Market sentiment was briefly unsettled last week by reports claiming no formal US–China soybean deal existed. Officials later clarified that China is purchasing under a monitored framework, with roughly a third of the 12 million tonne commitment for 2025/26 already completed. Treasury Secretary Scott Bessent said China is progressing at the “correct cadence” and is expected to meet the full commitment by February 2026—later than the White House had originally suggested. China has yet to officially confirm the volume or schedule.
Despite the recent pickup in shipments, US soybean sales to China remain behind seasonal targets, and futures have fallen to six-week lows amid record South American supply and slower Chinese buying.
Adding support for farmers, President Donald Trump announced a USD 12 billion aid package Monday to offset trade-related losses. Agriculture Secretary Brooke Rollins said USD 11 billion will go to row-crop farmers, with USD 1 billion for specialty crops. Payments, capped at USD 155,000 per farm or person, are expected by the end of February 2026.
Source: USDA
War and Peace in Trade Routes
Escalating conflict in the Black Sea continues to raise operational risk and costs for vessels calling Russian and Ukrainian ports. Ukrainian strikes on Russian maritime and energy assets, along with recent attacks on tankers off Turkey’s northern coast, have pushed additional-war-risk premiums to 5–6% from 0.5% a month earlier, lifting freight rates on Russian crude routes.
With Russia exporting over 1.4 million barrels per day of crude and condensate from the basin, and major buyers such as China, India, the EU and Turkey dependent on these flows, any further disruption could pressure regional trade.
By contrast, the Red Sea and Suez Canal are showing early signs of recovery as ceasefire conditions reduce attacks on merchant shipping. CMA CGM has become the first major carrier to structurally reinstate a full east–west service—the INDAMEX—via Suez, with additional vessels already testing the route.
Other carriers remain cautious but falling war-risk premiums and shorter transit times are prompting more lines to reassess diversions around the Cape. Traffic remains far below pre-2023 levels, though a gradual return of vessels suggests improving confidence.
A broader return to Suez would carry major market implications. Shorter rotations cut round-trip time by up to two weeks, enabling carriers to operate the same services with fewer ships. Analysts estimate this could free 1.5–2 percentage points of effective global container capacity—and up to 4% once all Cape-routed vessels cycle back.
While rates may see brief volatility during the transition, the longer-term effect is strongly deflationary: a large-scale return would release substantial capacity into an already oversupplied market, exerting renewed downward pressure on global container freight rates.
Container Overcapacity Weighs on Rates
Already, carriers face depressed prices as overcapacity continues to weigh heavily on the major East–West trades. Spot rates from East Asia and China to the US West Coast have fallen to the USD 1,180–1,200/FEU range—five to six consecutive weekly declines—while East Coast rates have slipped to around USD 1,550/FEU. The typical West–East Coast spread has narrowed sharply, with both lanes now sitting near annual lows.
Source: Drewry
Analysts point to persistent oversupply as the primary driver. Carriers have been reluctant to withdraw ships during the seasonal winter slowdown, even as demand softens and the US holiday period proves weaker than expected. This has left the market saturated at a time when rates usually receive support ahead of Chinese New Year. Freightos reports that rates are only marginally above their yearly bottom, with little evidence of a rebound unless broader market conditions shift.
New Trump Tariffs?
President Trump has threatened a new series of targeted tariffs aimed at protecting US farmers. At a White House roundtable, he warned of “very severe” duties on Canadian fertilizer to accelerate reshoring and address high input costs—an action that would quickly ripple through US crop economics given America’s dependence on Canadian potash.
Source: USDA
Trump also accused India of “dumping” rice into the US market and floated additional tariffs on top of the 50% levy already imposed this year, despite analysts noting Indian rice represents only a small share of US imports and that any move would be politically driven rather than market based.
Farmers harvest rice in the field, India
The tariff rhetoric continued on Tuesday, with a threat to impose a 5% duty on Mexico if it fails to release water owed under a 1944 treaty, which Texas farmers rely on for irrigation. Washington has long accused Mexico of falling short on its obligations, but linking the issue to trade penalties introduces a new point of friction with a major agricultural and manufacturing partner.
While none of the proposed measures are guaranteed, the renewed willingness to deploy tariffs across multiple fronts increases uncertainty heading into 2026.
Indonesian to Cut Palm Oil Export Tax
Indonesian suppliers have deferred around 310,000 tonnes of palm oil shipments from late November into early December—an unusually large shift—as traders anticipate that Jakarta will cut the December export tax by more than USD 50/tonne.
By delaying loadings to capture the lower levy, sellers are set to lift December exports above their typical seasonal levels, with India’s imports alone projected to rise to 750,000 tonnes from 650,000 tonnes in November. The expected tax reduction follows a recent slide in benchmark prices and reflects Indonesia’s monthly adjustment mechanism for crude palm oil levies.
Source: World Bank
At the same time, Indonesia has also intensified enforcement against illegal land use, with a government task force ordering palm oil and mining companies to pay IDR 38.6 trillion (USD 2.3 billion) in fines and seizing 3.7 million hectares of plantations.
Palm oil plantation, Indonesia
In Other News:
- EU to Loosen Environmental Rules for Mining: Under its RESourceEU plan, the European Commission plans to relax water, chemical and permitting regulations to enable more domestic mining of critical minerals and reduce reliance on Chinese imports. The move comes alongside an upcoming “environmental omnibus” bill, aimed at cutting back and simplifying parts of EU environmental law to streamline approvals for strategic projects.
- Climate Costs Mount in SE Asia: We discussed the extreme flooding in SE Asia in our previous Trade Update. Scientists now warn that such punishing storms and floods are becoming the new normal as Asia warms nearly twice as fast as the global average. The events this year have already caused billions of dollars in damage: Vietnam estimates over USD 3 billion lost, Thailand around USD 781 million, and Indonesia typically sees USD 1.37 billion in annual disaster costs.
- US-South Korea Trade Deal: The US and South Korea formalised a trade pact setting a 15% tariff on most imports while easing limits on US car shipments and addressing non-tariff barriers. South Korea will invest USD 350 billion in the US, including USD 150 billion in shipbuilding.
- African Swine Fever in Spain and Taiwan: African swine fever, harmless to humans but often fatal to pigs, has been detected in wild boars in Catalonia, Spain, and also reported in Taiwan. In response, the Philippines has temporarily banned imports of pigs and pork products from both countries, allowing only limited pre-existing shipments. The virus, long endemic to Africa, appeared in China in 2018—killing up to 100 million pigs—and reached Germany in 2021. Spain, the EU’s largest pork producer, exported EUR 5.1 billion of pig meat to EU countries and EUR 3.7 billion abroad last year.
