Saudi to double wheat stock to one year

Saudi Arabia is planning to double its wheat stockpile to cover a period of one year instead of six months following global farming market turbulence and its decision to halt local grain production, Saudi media reported on Monday.

The Gulf kingdom’s Shura council (appointed parliament) approved the plan at its first session on Sunday following a three-month summer recess.

The Shura reviewed a report by the country’s General Grain Silos and Flour Mills Organisation on domestic cereal needs and the need to raise the strategic wheat stockpile to cover a period of one year.

“The Shura council discussed and endorsed a proposal by the organisation to raise the local strategic wheat stockpile to cover one year instead of six months to face any disruption or emergency following the recent market turmoil,” the Saudi Arabic language daily 'Aleqtisadiah'said.

“The proposal followed a decision by the cabinet to stop buying wheat from local farmers gradually within a period of eight years at a rate of 12.5 per cent a year…but the decline in such purchases has far surpassed the target, with the quantity of wheat bought by the government from local farmers in the 2007-2008 season falling by around 36 per cent over the previous season.”

The newspaper quoted a report by the organisation that it would completely stop buying local wheat in 2016 and that this will make it unable to support the strategic six-month stockpile to face any crisis.

“The report made clear that the current stockpile period is not sufficient and needs to be expanded, adding that its silos have the capacity to accommodate a stock that will cover a period of more than one year…the report also noted that raising the stockpile will strengthen the organisation’s bargaining position in the purchase of wheat from foreign markets,” it said.

Saudi Arabia, which controls over a fifth of the world’s recoverable oil deposits, decided three years ago to halt local wheat production and rely on imports from foreign markets to preserve its dwindling water resources.

The desert kingdom had produced nearly three million tonnes of wheat per year to meet domestic needs but output is expected to plunge to one million tonnes this year following its decision to stop subsidising local production.

In the next two to three years, output could shrink further and the country will become almost totally reliant on imports, mainly from the West.

The decision involved a gradual increase in wheat imports and a reduction in the government’s purchases from local farmers by 12.5 per cent a year to conserve water following reports about an alarming decline in underground resources.

Officials said the government would start reducing purchases of wheat from local farmers gradually and move to 100 per cent reliance on foreign imports by 2015.

Saudi Arabia produced nearly three million tonnes a year of durum and soft wheat. Cereal and dairy farms account for 85 per cent of water consumption.

The decision to rely on imported wheat follows a surge in Saudi Arabia’s food imports over the past few years, with the bill peaking at nearly SR65 billion (Dh63.6bn) in 2009 compared with around SR55bn in 2008.

The figures showed Saudi Arabia is recording one of the fastest growth rates in food imports in the Arab World, averaging around nine per cent during 1995-2008. In 2008, Saudi Arabia alone accounted for more than 40 per cent of the total Arab food gap, the difference between farm exports and imports.

Poor water ground resources have forced Saudi Arabia to rely on sea desalination facilities, for which it has invested hundreds of billions of dollars.

Saudi Arabia is now the world’s largest producer of desalinated water, which meets 70 per cent of its present drinking water needs.

Jolted by a surge in global food prices in 2007 and 2008, Saudi Arabia has turned abroad to ease reliance on farm imports by investing in agricultural projects in Sudan and other fertile countries.

In a recent study, a key Saudi bank has warned that such projects carry political risks and urged the kingdom to enter into strategic alliances with major global food suppliers to ensure its farm needs in the long term. “Investing in agriculture abroad is easier said than done because the investments are often politically charged and local players could regard Gulf investors as potential ‘land grabbers’…. certain sub-Saharan African countries are themselves often net food importers, adding to the investment risk, particularly given severe climate changes occurring globally, the first half of 2010 was the warmest on record,” Banque Saudi Fransi (BSF) said.

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