Reference Date: 06-September-2016
FOOD SECURITY SNAPSHOT
Phasing out of wheat production completed
Cereal import requirements forecast stable in 2016/17
Plans to gradually cut some subsidies implemented, food prices mostly stable
Wheat production phased out
Saudi Arabia implemented the 2007 Government decree to completely terminate wheat cultivation by 2016 by gradually reducing wheat production quotas for registered farmers. The measure reflected strong concern over the depletion of local water reserves which were used to irrigate wheat production.
Some farmers reportedly switched from wheat to forage crops which consume more water than wheat. In December 2015, the Ministry of Agriculture was instructed to issue a three‑year phase‑out plan to terminate local production of green fodder by 2019. The Government estimates that the termination of green fodder production would save about 7 billion cubic metres of water annually.
Wheat farmers are encouraged to engage in alternative sustainable production activities such as greenhouse farming or production of fruits and vegetables using advanced drip irrigation techniques. No penalties were announced for farmers who continued growing wheat after 2015. A small crop of no more than 10 000 tonnes for traditional specialty bakery products is expected to prevail.
Furthermore, in November 2015 the Saudi Grain Silos and Flour Mills Organization (GSFMO) was restructured and renamed the Saudi Arabia Grains Organization (SAGO). SAGO maintains the exclusive authority of the Government agency to import subsidized milling wheat, as well as to own and operate wheat silos in the country. The restructuration set up four milling companies that will be privatized via a bidding process. Mills would be allowed to import wheat for non‑subsidized flour. SAGO will also act as a regulator of the wheat milling sector, including setting wheat flour quality regulations, inspecting mills and regulating the competition among private millers.
In light of decreasing domestic production and strong domestic demand, Saudi Arabia is encouraging agricultural investments and production abroad for re‑export to Saudi Arabia. This initiative targets wheat, rice, barley, yellow maize, soybeans and green forage.
Cereal imports to remain stable in 2016/17
Cereal import requirements in the 2016/17 marketing year (July/June) are forecast at 18.5 million tonnes, about the same as in the previous year and 2 million tonnes above the five‑year average. Imports of barley and maize, mainly used for feed, constitute the bulk of the cereal imports and are forecast at 9.7 million tonnes and 3.5 million tonnes, respectively. The Government has been encouraging the use of processed feed instead of raw barley to reduce barley imports by 1.5 million tonnes by 2020. Wheat imports are also expected to remain high at 3.8 million tonnes, while rice imports are forecast at an above‑average level of almost 1.5 million tonnes.
Plans to gradually cut some subsidies announced, food prices mostly stable
In December 2015 the Government announced that it plans to gradually cut subsidies, starting with a 50 percent increase in petrol prices from January 2016, in an effort to counter decreases in oil revenues. Other increases included rises in electricity and water bills as well as increases of tobacco prices in March 2016. Consequently, the overall inflation increased from its average of 2.2 percent in 2015 to 4.2 percent in the first half of 2016. Food price inflation in June 2016 recorded a decrease of 0.1 percent. Prices of wheat flour have not changed for over 30 years, wholesaling 1 kg of consumer packed wheat flour between USD 0.27 and USD 0.33 per kg.