Reference Date: 19-August-2014
FOOD SECURITY SNAPSHOT
Phasing out of wheat production continues
Cereal import requirements forecast at high levels in 2014/15
Wheat production gradually phasing out
Production of the 2014 wheat crop, harvested last May, is estimated at 500 000 tonnes, some 17 percent lower than in 2013. This follows the adoption of the 2008 decree that aims at phasing out domestic wheat production annually and completely terminating wheat production by 2016 because of a strong concern over the depletion of local water reserves in irrigated wheat production. In line with the decree, wheat planted area gradually decreased from 450 000 hectares in 2007 to about 83 000 hectares in 2014. A similar decree is being considered to phase-out forage production as some farmers shifted from wheat to even more water demanding forage crops.
The Government intends to maintain the guaranteed purchase price for locally grown wheat at USD 267 per tonne until 2016. In 2016, the Saudi Grain Silos and Flour Mills Organisation (GSFMO) are planned to stop purchasing locally produced wheat.
With increased reliance on trade to satisfy domestic food and feed requirements, Saudi Arabia plans to raise the storage capacity of its grain silos to bring its strategic reserves closer to annual wheat consumption by the end of 2015. There are new wheat silos under construction, bringing the total GSFMO wheat storage capacity to about 3.7 million tonnes by the end of 2015, up from 2.1 million tonnes in 2011.
Elsewhere, a study on how to restructure the GSFMO is under way with plans to privatize its flour mills while maintaining the exclusive Government agency to import subsidised milling wheat, as well as to own and operate wheat silos in the country.
In light of decreasing domestic production, strong domestic demand and environmental concerns, Saudi Arabia is encouraging agricultural investments abroad and re-exporting products to Saudi Arabia. This initiative targets wheat, rice, barley, yellow corn and green forage.
Cereal imports to remain high in 2014/15
Cereal import requirements in 2014/15 (July/June) are forecast at 15.9 million tonnes, about the same as in the previous year, but well above average. Similarly, wheat imports would also remain high at 3.3 million tonnes to maintain current milling demand levels.
Imports of barley and maize, mainly used for feed, are forecast at 8.5 million tonnes and 2.7 million tonnes, respectively. The Government has been encouraging using processed feed instead of raw barley to reduce barley imports by 1.5 million tonnes by 2020. Import requirements of rice, a basic staple food which is totally imported, are forecast at an above-average level of about 1.3 million tonnes.
Subsidies maintain stable food prices
Owing to the Government’s maintenance of price subsidies on a range of basic goods, such as food and electricity, the overall inflation rate remains relatively modest at a level of about 2.6 percent in July 2014 (year-on-year). Food and beverages prices in the second quarter of 2014 increased by 0.2 percent (latest data available) compared to the last quarter of 2013, and by 3.1 percent compared to the corresponding quarter of 2013.