Dawn (Pakistan) | Sunday, 26 Apr, 2009
By Syed Rashid Husain
RIYADH: Saudi Arabia is giving up its 30-year old programme of attaining self-sufficiency in wheat production and instead is looking at nearby foreign lands to secure its growing food requirements.
The Saudi Grain Silos and Flour Mills Organisation (GSFMO) started importing wheat last September after Riyadh decided to cut wheat production by 12.5 per cent per year. A surge in input costs last year and the lower price paid by the government for locally-produced wheat compared to the international price has pushed local producers to abandon wheat farming faster than the government anticipated.
The drop in Saudi wheat production has been rather rapid 30 per cent over the last year forcing Saudi Arabia to seek food security elsewhere.
Saudi Arabia produced 2.3 million tons of wheat in 2008, according to the US Department of Agriculture. The Saudi wheat output touched a peak of 4.5 million tons in 1993.
Overall, Saudi agricultural production amounted to a surplus then and Riyadh became a net exporter of many edibles, wheat included. However, depleting water resources and the consequential environmental disaster to the desert kingdom forced it to relook at the entire strategy.
GSFMO’s head Waleed al-Khariji told Saudi daily al-Hayat last week that the kingdom needs a minimum of 2.6 million tons of wheat per year and plans to import 700,000 tons of wheat by August to add to the 470,000 tons it has imported since September 2008.
Khariji also said domestic wheat production would be eliminated ‘within eight years’, hinting apparently that authorities may speed up the process.
The issue of food security is thus getting higher on Riyadh’s priority list. The country recently announced the creation of Saudi Company for Agricultural Investment and Animal Production, with a capital of $800 million that will focus on cultivation of wheat, rice, sugar and soybeans abroad.
The state-owned firm would attempt to generate interest of private Saudi investors in foreign farm projects by providing them credit and by negotiating deals with Australia and Argentina, as well as with countries in Africa, Asia and Eastern Europe.
Due to the encouragement and the incentives provided by the Saudi government, a number of private firms are already investing in farmlands abroad. Al Rajhi for International Investment, planned to spend at least $400 million by 2011 to produce wheat and corn in Egypt and Sudan.
Tabuk Agricultural Development Co. (Tadco) is ‘looking into joint-venture proposals from firms abroad and mulls relocating some of its activities to countries offering comparative incentives for investment.’ The company produced about 51,000 tons of wheat, about 63,000 tons of livestock feed and about 38,000 tons of other farm products such as potatoes, onions and fruits last year.
Another company, Aljouf Agricultural Company is also looking for investments in agricultural projects or agri-business industries abroad. Aljouf produced 119,000 tons of wheat and some 32,000 tons of livestock feed and about 50,000 tons of fruits and vegetables in 2008.
Hail Agricultural Development Company (Hadco) has also announced plans of investing about $45.3 million over the next two years developing 22,830 acres in northern Sudan. It is also looking closely at the prospects of investing in Turkey and Kazakhstan.
Another group of private Saudi investors was also planning to spend $100 million to plant wheat, barley and rice in Ethiopia. And some reports indicate that Saudi investors were seeking to lease 1.235 million acres in Tanzania to grow rice and wheat. Saudi Arabia has already secured 1.6 million hectares of agricultural land in Indonesia.
Some private Saudi entrepreneurs have already moved to Thailand. Discussion with Sudan is also reportedly in advanced stages. Pakistan has also been on the radar for investments. Some discussions are already taking place. Pakistan has offered to lease one million acres to friendly countries anxious to secure food supplies.‘Negotiations are underway with Saudi Arabia, Bahrain and UAE and agreements with these states will be signed soon,’ the investment minister recently told the press.