Global grain market outlook: Hormuz, the Sea of Azov and China's soybean commitment

Key takeaways

• Grain exports via the Sea of Azov have been completely halted: As a result, Kpler estimates as much as 6.5 Mt of Russian wheat export potential could be lost in H2 2026. In turn, monthly volumes during H1 2027 are likely to see higher levels.
• Saudi Arabia and the UAE have rerouted away from Hormuz: Saudi Arabia's share of Middle East Gulf grain flows moving through the Strait has fallen significantly, with volumes shifting to Yanbu on the Red Sea. The UAE has moved almost entirely from Jebel Ali to Fujairah, an east-coast port outside the Strait.
• Middle East Gulf fertiliser exports remain constrained: A backlog of laden vessels queued inside the Gulf peaked close to 60 during May. The signing of the memorandum of understanding between the US and Iran saw almost all vessels exit, but few ballast vessels are looking to return to the Gulf to load fertiliser.
• The US corn crop is tracking above trend: The most recent USDA Crop Progress report puts the crop at 67% good or excellent, above the 65% threshold historically associated with at-or-above trend yields.
• China remains far short of its soybean commitment: New-crop US soybean sales to China stand close to 3 Mt, against a 25 Mt target agreed in October 2025 and affirmed in May 2026.

What is currently disrupting global grain markets?

Three separate developments are compounding at once, and each affects a different part of the grain trade:

• The Sea of Azov closure could cut Russian wheat export capacity by as much as 6.5 Mt for H2 2026, with Middle East and North Africa (MENA) importers most exposed.
• Restricted trade via the Strait of Hormuz is constraining Gulf fertiliser exports, though Saudi Arabia and the UAE have largely rerouted grain imports.
• China's US soybean purchases have yet to show sufficient momentum to meet the 25 Mt commitment, maintaining uncertainty around new-crop pricing ahead of a planned September meeting between the US and Chinese presidents.

How is the Strait of Hormuz disruption affecting Gulf grain and fertiliser shipments?

The Middle East Gulf continues to divide grain importers into those with rerouting options and those without.

Iran: BIK still open, no alternative required

Iran is still receiving vessels at Bandar Imam Khomeini (BIK), its primary grain port and the hub for its livestock sector, which depends on imported feed for poultry and dairy. Vessels calling at BIK have so far been able to transit the Strait on both the laden and ballast legs (the outbound, cargo-carrying voyage and the return voyage with no cargo).

Chabahar Bay, Iran's eastern port outside the Strait, has picked up some activity, but it is a poor substitute at scale. Iran's livestock industry is clustered around BIK, and routing corn, soybean meal and other feed through Chabahar and inland is not operationally viable in volume.

Saudi Arabia and the UAE: early rerouting away from the Strait

Saudi Arabia and the UAE adapted early. Saudi Arabia's share of total Middle East Gulf grain flows moving through the Strait of Hormuz has dropped significantly. Vessels, including cargoes originating in South America, now arrive via Yanbu on the Red Sea, rerouted through the Mediterranean and Suez Canal.

The UAE has made a similar pivot, moving almost entirely from Jebel Ali to Fujairah, an east-coast port that sits outside the Strait. Both countries began rerouting before the disruption intensified, which is why neither has faced the delays seen in Iraq.

Iraq: no alternative routing available

Iraq has no alternative to the Strait of Hormuz. Only a handful of grain vessels have reached Iraq since early June. Several vessels from Brazil, Argentina and Ukraine are scheduled, but whether they arrive on schedule remains uncertain given current operational conditions in the Gulf.

Middle East Gulf fertiliser exports: backlog clearing, capacity still thin

On the fertiliser side, a backlog of laden vessels queued inside the Gulf peaked close to 60 during May. Following the signing of the memorandum of understanding between the US and Iran, that backlog had largely cleared, led by UAE sulphur shipments and cargoes of urea and DAP (diammonium phosphate).

However, available loading tonnage heading into August is very limited. If vessels do not enter the Gulf to load, sellers risk halting production once storage capacity is exhausted.

Why has the Sea of Azov closure cut Russian wheat export capacity?

The most significant recent development for global wheat markets has come not from the Gulf but from the Sea of Azov, where grain operations have come to a complete standstill.

Scale of the disruption: 35% of Russian wheat exports affected

The Sea of Azov accounts for approximately 35% of Russian wheat exports. Cargoes move on draft-restricted coasters, which shuttle grain to Kavkaz, outside the Kerch Strait, for transshipment onto larger vessels or for direct delivery to nearby destinations, mainly Türkiye.

Terminals around the Sea of Azov are not accepting incoming grain, trucks are queued outside with nowhere to unload, and storage capacity at Black Sea terminals are minimal. This coincides with the peak of the Russian harvest, precisely when Azov-catchment ports would normally be running at maximum throughput.

Why Novorossiysk cannot absorb the lost volume

Novorossiysk, the main alternative Black Sea export hub, is already running at full capacity and is expected to continue doing so for the upcoming months. Azov volumes cannot simply be redirected there because there is no spare capacity to absorb them. Additionally, storage capacity at Novorossiysk sits at around 0.6 Mt, so is unable to easily process greater grain deliveries from the north.

Kpler estimates that roughly 6.5 Mt of Russian wheat export capacity could be lost during H2 2026. This figure reflects the cumulative effect of the closure through the third and fourth quarter. Q3 shipments are expected to drop to the lowest levels seen in recent years.

MENA exposure and alternate wheat supply

MENA is one of the most exposed regions, recently sourcing more than 60% of its wheat imports from Russia and Ukraine. In periods of uncertainty, these buyers tend to increase imports to build strategic stocks, meaning the disruption could increase aggregate wheat demand rather than simply defer it. MENA buyers are already showing signs of this behaviour, with tender activity emerging.

Wheat supply from alternate major wheat exporters is slightly lower year on year in aggregate but is the second highest in the past ten years. Global wheat supply exists in sufficient volume but prices, rather than physical scarcity, will determine whether it moves.

Is the US corn crop on track for a trend or above-trend yield?

The condition of the US corn crop is performing above the five-year average. The most recent USDA Crop Progress report scored the crop at 67% good or excellent, at a time when the crop is now in its pollination stages. A crop averaging at least 65% good or excellent during July has historically tended to produce at or above trend yield. The crop is not finished yet though so future weather could still be impactful, but current condition scores do not point towards concern.

On trade, US corn exports remain at record pace for the 2025/26 marketing year, supported by production of a record crop in 2025. Sales data for the next marketing year suggests that the strong export competitiveness is yet to wane.

Brazil's domestic corn demand has been a contributing factor towards the record US export campaign. Corn ethanol demand is running at record pace, supported by favourable biofuel policy and plant expansion. The recent mandate seeing a two-percentage point increase to the ethanol blend ratio for the next six months, which could be extended, further boosts domestic corn demand. Brazilian corn feed demand is also the highest in ten years, supported across the poultry, pig, and cattle sectors.

Argentina produced a record corn crop of 60 Mt earlier this year. Export sales are running at a level comparable to previous marketing years of strong export campaigns. Argentine corn is pricing very competitively on the global market and is finding particularly strong demand in North Africa. This is helping to offset the loss of demand across Japan, South Korea, and Taiwan, which have been mostly focused on US supply.

China's progress towards its 25 Mt US soybean commitment

China has committed to purchasing 25 Mt of US soybeans for 2026/27 under terms agreed at a US-China meeting in October 2025 which were affirmed in May 2026. Current new-crop sales to China stand close to 3 Mt, leaving a gap of roughly 22 Mt. In a typical year without political interference, Chinese purchasing would normally be much further along at this point in the season.

The USDA's latest balance sheet shows total US soybean exports for 2026/27 up 4 Mt versus 2025/26. But if China is set to take 25 Mt next year against roughly 12 Mt this year, the implied increase to China alone is 13 Mt. For total exports to rise by only 4 Mt, non-China destinations would need to take 9 Mt less. At current prices, where US FOB offers are competitive against Brazilian origin, that displacement is less likely to occur. Sales to non-China destinations are running slightly ahead of normal.

Trend-following CTAs that were largely neutral through most of June, began building long positions in early July, and are now heavily deployed on the long side. The market is beginning to assign some probability to China following through on its purchase commitment.

On the separate $17 billion non-soybean trade commitment, China has not yet begun buying US corn at the volume required to meet that commitment. The expectation remains that any material activity here would likely follow the September meeting rather than precede it.

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Key watchpoints

• Sea of Azov: the situation is live and evolving. Kpler is monitoring whether ballast vessels currently holding off from Kavkaz begin redirecting to alternative Black Sea ports.
• Middle East Gulf fertiliser exports: as fertiliser loadings remain lacklustre in the Gulf due to limited ballast vessels transiting the Strait, this could tighten supply for the global fertiliser market.  
• China soybean purchases: the gap between roughly 3 Mt purchased and the 25 Mt commitment is the central unresolved question for new-crop US soybean pricing. The outcome from the expected September meeting between the US and Chinese presidents will help inform market direction.
• US corn development and sales: the crop is in a favourable position heading into the back half of July, limiting yield development concerns. Eyes are also on whether China begins buying US corn at a volume consistent with its dollar commitment. Currently, China has no US corn on the books.