GLOBAL trade is facing further disruption with another major shipping route putting restrictions in place, this time due to drought, which could have a significant impact on Australia’s export of red meat to the east coast of the United States and Canada.

The Panama Canal is one of the world’s busiest maritime trade routes, handling 5 per cent of global maritime trade, according to news website Al Jazeera, as it shortens shipping routes between the Atlantic and Pacific Oceans.

At the start of this month the canal reduced the maximum number of ships allowed through daily, from 36 to 34 with another reduction starting this week which will see the limit decrease to 32 ships a day.

Canal officials have warned further reductions could be made if there is not sufficient rain over the next three months.

Rabobank Senior Animal Protein Analyst with RaboResearch, Angus Gidley-Baird said the fourth quarter is usually the busiest time for agricultural trade through the Panama Canal.

“The delays and resulting cost increases to divert ships could have a serious impact on both South and North American agricultural trade,” he said.

Mr Gidley-Baird explained the canal is a significant route for red meat exports from Australia.

“In the last five years over 70pc by volume of our US exports are destined for the US east coast and about 90pc of our exports to Canada are destined for the Canadian east coast,” he said.

“I presume that most of that would need to pass through the Panama Canal, although some of that would go by air freight.

“But if the US took about 29pc of Australia’s total beef production last year and if over 70pc of that went to the US east coast, roughly that’s about 24pc of Australia’s production went to the US east coast and was likely to pass through the Panama Canal.

“That volume is more than the volume that we sent to China, Japan or South Korea last year.”

These numbers are estimated based off a high-level assessment by Mr Gidley-Baird and don’t take into account the split of air verse sea freight.

According to figures from Meat and Livestock Australia (MLA) in August Australia exported 5,503.65 tonnes of red meat around the world via air and 166,471.15 tonnes by sea. This demonstrates the importance of shipping for red meat around the world.

The last time the Panama Canal had restrictions was during the 2023-24 drought, when daily shipping numbers were reduced to 22, however this disruption comes at a sensitive time for global shipping.

“The Panama Canal depends on freshwater to operate the locks that raise and lower vessels travelling between the Atlantic and Pacific oceans. Water comes mainly from the artificial Gatun and Alajuela lakes, which are replenished by rainfall,” Al Jazeera’s article states.

“The Panama Canal’s importance has increased as traffic through the Strait of Hormuz in the Middle East has fallen sharply amid the US-Israel war on Iran.

“Some vessels have recently paid more than $1m at auction to secure transit ‌slots through the canal.”