Reference Date: 06-May-2015
FOOD SECURITY SNAPSHOT
Phasing out of wheat production continues
Cereal import requirements forecast at high levels in 2015/16
Wheat production gradually phasing out
In Saudi Arabia, harvesting of winter grains is currently underway. Production of the 2015 wheat crop is forecasted at 400 000 tonnes, some 20 percent lower than in 2014. This follows the adoption of the 2008 decree that aims at phasing out domestic wheat production progressively so as to completely terminate its cultivation by 2016. The measure reflects strong concern over the depletion of local water reserves, which are used to irrigate wheat production.
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 Organization (GSFMO) are planning to stop purchasing locally-produced wheat.
With increased reliance on imports to satisfy domestic food and feed requirements, Saudi Arabia plans to raise the storage capacity of its grain silos, so as to bring its strategic reserves closer to the 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 underway with plans to privatize its flour mills, while maintaining the exclusive authority of the Government agency to import subsidized 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 and production abroad for re-export to Saudi Arabia. This initiative targets wheat, rice, barley, yellow maize and green forage.
Cereal imports to remain high in 2015/16
Cereal import requirements in the 2015/16 marketing year (July/June) are forecast at 16 million tonnes, about the same as in the previous year, but well above average. Similarly, wheat imports would also remain high at 3.5 million tonnes.
Imports of barley and maize, mainly used for feed, are forecast at 7.5 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. Import requirements of rice, a basic staple food which is totally imported, are forecast at an above-average level of almost 1.5 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 low at about 2.4 percent in December 2014 (year-on-year). Food and beverages prices in the last quarter of 2014 increased by 1.9 percent (latest data available) compared to the third quarter of 2013, and by 3.1 percent compared to the corresponding quarter of 2013.