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Country Briefs

  Saudi Arabia

Reference Date: 22-June-2017

FOOD SECURITY SNAPSHOT

  1. Phasing out of wheat production completed in 2016, green fodder to be phased out by 2019

  2. Cereal import requirements forecast to decline in 2016/17

  3. Cash transfer programme to compensate cuts in universal subsidies to be implemented in 2017

Wheat production phased out in 2016, green forage to be phased out by 2019

The country completely terminated its wheat cultivation by the end of the 2015/16 marketing year by reducing wheat production quotas and purchase programmes for registered farmers. The measure reflected strong concern over the depletion of local water reserves which were used to irrigate wheat production. As some farmers switched from wheat to forage crops which consume more water than wheat, currently a three‑year phase‑out plan to terminate the local production of green fodder by 2019 is being also implemented.

Farmers of phased-out crops 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 although State purchasing programmes are no longer in place. A small wheat crop of no more than 10 000 tonnes for traditional specialty bakery products is expected to prevail.

In light of the decreasing domestic production and strong domestic demand, 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.

Cereal imports to increase in 2017/18

Cereal import requirements in the 2017/18 marketing year (July/June) are early forecast at 20.4 million tonnes, about 7 percent above the previous year and 3 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 11 million tonnes and 4.2 million tonnes, respectively. The Government has been encouraging the use of processed feed instead of raw barley with the aim to reduce barley imports by 1.5 million tonnes by 2020. Wheat imports are expected to remain high at 3.9 million tonnes, while rice imports are forecast at an average level of about 1.3 million tonnes.

Subsidies to be replaced by cash transfer programme

The Government is continuing with subsidy reforms to bring fuel and utilities prices closer to international benchmarks following the first cuts in December 2015. Low and middle income families affected by the increases could have registered for cash transfers from February 2017, with the first allowance to be paid in the month preceding the change in prices of energy and water products. The rate of allowances will be announced with every economic reform.

An excise tax on selected products, including a 50 percent tax on soft drinks and a 100 percent tax on tobacco and energy drinks, was implemented on 10 June 2017. The Gulf Cooperation Council countries are also set to implement a value-added tax of 5 percent on certain goods in January 2018.

The overall inflation from January 2017 to May 2017 was negative 1 percent. The food price inflation recorded a decrease of 2.3 percent in May 2017, owing to strong US dollar to which the Saudi Riyal is pegged making food imports cheaper. 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.