IEG Vu is part of the Business Intelligence Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

This copy is for your personal, non-commercial use. Please do not redistribute without permission.

Printed By

UsernamePublicRestriction
UsernamePublicRestriction

Saudi grain market undergoing a transformation

This article is powered by The Public Ledger

Saudi Arabia’s plans to privatise its wheat milling industry will give private millers the option to import wheat from a wider range of origins through the loosening of strict specifications.

Access to more origins, and cheaper wheat, is one of many changes set to come to the Saudi grains sector though the privatisation and other government initiatives, Foodco supply chain manager Zahid Anwar told the Global Grains Conference in Dubai last week.

Announced in 2015, the privatisation of flour milling is one of the first privatisation plans in planned large-scale reforms of the Saudi economy. The Grain Silos and Flour Milling Organization was restructured under the new name Saudi Grains Organization (SAGO) and milling companies have been created for sale to investors.

The mills will be clients of SAGO, processing wheat and selling subsidised flour to approved customers. Mills will be free to import wheat for milling and selling at a non-subsidised rate, with less strict import criteria allowing access to cheaper origin markets. The government is targeting the removal of subsidised wheat by 2020, according to Anwar.

“There is a chance that when the subsidy is removed, prices of some products will go up. Indirectly, if we can access low-cost sourcing countries, the price will come back down,” said Anwar.

Foreign investors will have the opportunity to access the Saudi market, with a 49% cap on ownership of a mill. Fair competition between mills will be allowed, with an economical profit margin.

SAGO will target holding an eight-month stock of wheat, around 3.2 million tonnes, and will be the sole importer for subsidised wheat, with millers being paid a tolling fee for processing.

SAGO has signed contracts to build five additional silos in Mecca, Qassim, Jazan, Aseer, and Al-Hasa, which will increase the total storage capacity of Wheat to 3.7 mln tonnes by the end of 2019 and allow the company to purchase larger quantities when prices are attractive.

Demand for high quality wheat is expected to increase as hotel chains expand within Saudi Arabia as the country targets a sharp increase in visitors for the Hujj & Unmrah pilgrimages.

Barley imports into the Kingdom are expected to fall as the government tries to reduce the use of raw barley as a feedstock in favour of compound feed. The aim is to reduce barley imports by 1.5 mln tonnes by 2020. Imports for 2018/19 are forecast at 7.5 mln tonnes, down 300,000 tonnes on-year.

The government is supporting the processed animal feed industry in Saudi Arabia to help the move away from raw barley, with foreign investors allowed to wholly own companies in the sector. Hay production will be reduced to save water, and the ministry of agriculture will focus on substituting corn gluten feed and DDGS, changing feed ratios to improve efficiency.

Related Content

Topics

What to read next

UsernamePublicRestriction

Register

CO219997

Ask The Analyst

Please fill in the form below to send over your enquiry or check the Ask The Analyst Page to find out more about the service

Your question has been successfully sent to the email address below and we will get back as soon as possible. my@email.address.

All fields are required.

Please make sure all fields are completed.

Please make sure you have filled out all fields

Please make sure you have filled out all fields

Please enter a valid e-mail address

Please enter a valid Phone Number

Ask your question to our analysts

Cancel