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Country Briefs

  Saudi Arabia

Reference Date: 29-May-2020

FOOD SECURITY SNAPSHOT

  1. Wheat production gradually increases

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

  3. Food price inflation rates increase

Wheat production gradually increases

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

In 2019, about 200 000 tonnes of wheat were delivered to the Saudi Grains Organization (SAGO), the monopsony purchaser of wheat, although SAGO has been authorized by the Government to purchase up to 700 000 tonnes of wheat annually until 2024. As the Government strives to reduce domestic forage production, it is likely that more farmers will turn to producing wheat. Harvesting of the 2020 wheat crop is ongoing and production is forecast at about 500 000 tonnes. In the current season, SAGO’s net purchasing price is SAR 1 140 (equivalent to USD 304) per tonne, well above the current international price of USD 220 per tonne (without freight). Many farmers still prefer to produce fodder crops as 1 tonne of high protein locally produced alfalfa is currently sold at more than USD 300 per tonne.

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

As of May 2020, control operations were in progress against immature adult groups of desert locusts that formed in the Nafud Desert in the north and mature adult groups in the south near Yemen.

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. Most of the wheat is imported from the European Union.

Food price inflation rates increase

The overall inflation rate increased from negative levels in 2019 to positive 0.7‑1.5 percent between January and April 2020.

The food price inflation, which in 2019 remained below 3 percent, recorded a 6 percent year‑on‑year increase in April 2020, supported by increased demand during the lockdown. Wholesale prices of wheat flour for bakers and industrial users have not changed over the last 30 years, ranging between USD 0.27 and USD 0.33 per kg.

The decline in global oil prices is putting a 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 May 2020, the Brent reference price remained around USD 30 per barrel, well below the levels of USD 85 and USD 55 per barrel, respectively, needed to balance the budget deficit and the current account. In order to decrease the current budget deficit, the Value Added Tax (VAT) is scheduled to increase from 5 to 15 percent in July. The Government also plans to suspend the monthly living allowance, introduced two years ago to offset the increase in living expenses, to (approximately USD 267) in June to 1.5 million State employees.

COVID-19 and measures adopted by the Government

To contain the spread of the disease, Mecca and Medina have been under complete lockdown since 1 April 2020 and, on 6 April, the lockdown was extended to the whole country. Curfews as well as bans on gatherings, religious functions and movement were introduced, while schools and borders were closed. Curfew violators can be fined up to SAR 500 000 (over USD 133 000). In addition, non‑Saudi offenders risk being deported and permanently banned from entering the country. Economic activities, which can ensure social distancing, have resumed on 22 April 2020. Curfew easing started on 28 May allowing the movement within specified hours.

In March 2020, the Saudi Arabian Monetary Authority cut the repo rate at which the Central Bank lends to commercial banks from 1.75 to 1 percent. The King approved the raising of the debt ceiling from 30 to 50 percent of the GDP. A SAR 70 billion (USD 18.7 billion or 2.8 percent of the GDP) private sector support package was announced on 20 March 2020. The package includes the suspension of Government tax payments, fees and other dues to provide liquidity to the private sector and an increase in available financing through the National Development Fund. As the decline in global oil prices has decreased Government revenues, the authorities have announced that spending in non‑priority areas of the 2020 budget will be reduced by SAR 50 billion (2 percent of the GDP) to accommodate some of these new initiatives within the budget envelope.

On 3 April 2020, the Government authorized the use of the an unemployment insurance fund (SANED) to support up to 60 percent of wages, within certain limits, to private sector companies who retain their Saudi staff (SAR 9 billion, 0.4 percent of the GDP) and eased restrictions on expatriate labour mobility and their contractual arrangements.

The Saudi Human Resources Development Fund announced the allocation of SAR 2 billion to support 100 000 job seekers in the private sector, in addition to offering and activating remote working tools as available and alternative options for regular work.

Disclaimer: The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of FAO concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.