The impact of blockades on agricultural exporting

Disruptions in the Strait of Hormuz are creating systemic shocks to global trade flows, posing multilayered challenges for Vietnam's export-oriented agricultural sector, from rising costs to shifting market dynamics.

- By Assoc. Prof. Dr. Nguyen Dinh Tho

Empirical data from agricultural exports in the first half of March 2025 compared to the same period in 2026 reveals a clearer picture of value fluctuations compared to volume fluctuations. Cashew nuts, coffee, pepper, and rubber decreased fell somewhat sharply, while some commodities such as rice and cassava recorded a slight upward trend in unit prices. The increase was insufficient to offset rising input and logistics costs.

Tea was a rare case with a slight improvement in unit price, but this was accompanied by a significant decrease in export volume. Overall, the dominant trend was a decrease in unit value across most key commodities, reflecting cost pressures spreading throughout the supply chain.

Theoretically, the shock can be explained through two analytical frameworks: the cobweb model and the scissors effect. The cobweb model suggests that agricultural supply reacts with a lag to past prices due to long production cycles, leading to fluctuations of bumper harvests and low prices. Meanwhile, the scissors effect describes a situation where input prices rise faster than output prices, narrowing profit margins.

The Middle Eastern market accounts for only about 2 per cent of Vietnam's total agricultural exports, so the direct impact on demand is relatively limited in the short term. Furthermore, food demand has low elasticity, so total global consumption remains stable, contributing to maintaining export volumes.

However, the approach based on the proportion of direct trade has overlooked the strategic transit role of the Middle East region in the global logistics network. Major ports like Jebel Ali Port not only serve domestic consumption but also act as distribution centres for goods destined for Africa and parts of Europe. When the Strait of Hormuz is blockaded, access to these ports is disrupted, leading to a halt in the entire transit chain.