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Country Briefs

  Saudi Arabia

Reference Date: 18-November-2020

FOOD SECURITY SNAPSHOT

  1. Wheat production gradually increased since 2018

  2. Cereal import requirements forecast at average level in 2020/21

  3. Food price inflation increases as value added tax rise implemented

Wheat production gradually increased since 2018

Owing to natural and geographic conditions, crop production is limited to irrigated crops only. Since 2015, domestic wheat production, which on average used to be about 2.5 million tonnes from 500 000 hectares, was gradually phased out in an effort to stop the depletion of underground water reserves. However, in 2018, the Government reintroduced support for wheat production to provide forage producers with an alternative crop that is less water‑intensive than alfalfa, the main green fodder crop.

The 2020 wheat crop, harvested in May, is estimated at about 500 000 tonnes. In May 2020, the Saudi Grains Organization (SAGO), the monopsony purchaser of wheat, was purchasing wheat at SAR 1 140 (equivalent to USD 304) per tonne, well above the international price of USD 220 per tonne (without freight). However, despite the high procurement price of wheat, many farmers still prefer to produce high protein alfalfa as its income per hectare is higher.

In light of the strong domestic demand for food and feed, the Government is encouraging agricultural investments abroad to produce commodities to be then imported. This initiative targets wheat, rice, barley, yellow maize, soybeans and green forage.

As of October 2020, locust numbers declined as a result of control operations against immature adults present in the southern Red Sea. Depending on rainfall, breeding is expected to occur in December in coastal areas.

Average cereal imports forecast in 2020/21

Cereal import requirements in the 2020/21 marketing year (July/June) are forecast at an average level of 16 million tonnes, about 500 000 tonnes above the previous year. Imports of barley and maize, mainly used for feed, constitute the bulk of the cereal imports and are forecast at 7 million tonnes and 4.5 million tonnes, respectively. Wheat imports are expected at a slightly below‑average level of 3.2 million tonnes, while rice imports are forecast at an average level of about 1.3 million tonnes. The country strives to maintain its wheat stocks equivalent to six months of consumption.

Food price inflation steeply increased in July

The overall inflation rate increased from 2‑4 percent in the first quarter of 2020 to 13‑14 percent in the third quarter. The large increase in the food price inflation in July 2020 was caused by a rise in the value added tax from 5 to 15 percent in an effort to contain fiscal shortages. The decline in global oil prices has put pressure on the national budget. The oil sector contributes about 50 percent of the Gross Domestic Product (GDP) and oil revenues cover about 80 percent of country’s budget expenses. As of October 2020, the Brent reference price recovered slightly from USD 30 per barrel in May 2020 to USD 40 per barrel, but it remained well below the levels needed to balance the budget deficit and the current account of USD 85 and USD 55 per barrel, respectively. The Government is also providing support to business affected by the COVID‑19 pandemic and measures introduced to contain the spread of the virus. The economy is forecast to contract more than 5 percent in 2020, the biggest contraction since 1987.

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