With the help of generous production incentives, Saudi agricultural output has expanded sharply since the early 1980s. Cultivated land in 1995 stood at nearly 1.6 million hectares compared with fewer than 150,000 ha twenty years earlier.
AGRICULTURAL POLICY. The Ministry of Agriculture and Water continues to pursue its long-standing policy of self-sufficiency in foodstuffs. In 1995, self-sufficiency reached between 66% and 85% for fruit, vegetables and chicken broilers, while self-sufficiency in red meat was 46%.
Wheat and barley are key grains, and 100% wheat self-sufficiency was attained in the early 1980s. Indeed, Saudi Arabian wheat production, stimulated by government procurement prices that often were at least five times higher than world wheat prices, expanded to the point that the country became a notable wheat exporter during the decade ending in the mid-1990s.
But self-sufficiency in wheat did not occur without significant costs, given the desert conditions and the need for irrigation on 100% of planted area. Fifteen consecutive years of budget deficits and concern about groundwater depletion and contamination from leaching led to policy changes in Saudi Arabia in 1995, and the agricultural sector is continuing to adjust.
The Grain Silos and Flour Mills Organization (G.S.F.M.O.) is the government agency responsible for setting production targets; distributing wheat and barley quotas to farmers; organizing the collection of wheat and barley; milling wheat; and organizing the discharge, bagging and distribution of these grains. Since 1995, G.S.F.M.O. policy has been to target wheat production to meet domestic needs only, and wheat exports were halted in the second half of that year.
G.S.F.M.O. used drastic cuts in production quotas to effect the new policy, as the 18,000 or so wheat and barley farmers can receive government support prices only for wheat within pre-assigned quotas. In addition to lower quotas, the guaranteed procurement price for wheat was reduced to U.S.$400 per tonne from U.S.$533 per tonne, which cut into profit margins. Wheat production costs are estimated in a range of about U.S.$190 per tonne to as much as U.S.$270, depending on farm size, irrigation well depth and overall farmer efficiency.
Since the changes took effect, Saudi wheat production has declined from more than 4million tonnes in 1992 to the 1998 level of about 1.8 million tonnes, equal to the official quota.
As a result of the 1995 grain policy changes, Saudi farming operations have diversified. Irrigation systems have been paid off, and farmers have been forced to look for new crops to plant.
In one instance, a large share-holding operation previously grew only wheat on 365 center pivots, with each pivot covering 50 to 60 hectares. Now, only about 90 pivots are in wheat, and that area is for seed wheat only.
The remaining area is planted in a wide array of fruits and vegetables, and the farm has installed a vegetable processing and packing plant. In addition, the farm has moved into poultry production and has built a modern poultry processing plant.
The rise in fruit, vegetable and poultry output has led to a significant increase in the number of food processing plants in Saudi Arabia and has contributed to increasing self-sufficiency in those sectors.
FLOUR MILLING. In addition to administering domestic wheat production quotas and procurement, G.S.F.M.O. is responsible for all wheat flour milling in Saudi Arabia. The agency's first mill began operations in 1977; by 1985, total capacity was 3,300 tonnes of wheat per day.
Current Saudi industrial milling capacity is estimated at 7,100 tonnes of wheat per day. In 1998, a new 600-tonne mill began operations in the northern city of Tabuk, (see related story on Page 65) and capacity at an existing mill at Khamis Mushayt was increased by 500 tonnes.
G.S.F.M.O. also is responsible for flour marketing and establishes wholesale prices. The white flour price is U.S.$130 per tonne, with high-extraction flour set at U.S.$118.40 and whole wheat flour at U.S.$177.80.
Saudi Arabia produces a small amount of durum wheat for semolina. Semolina wholesale prices are set at U.S.$414.70 a tonne. Wheat bran, set at a price of U.S.$40 per tonne, is sold for animal feed.
Saudi Arabia has not imported bulk wheat or flour since it achieved self-sufficiency in the 1980s. Imports of regular planting seed for wheat were banned in the summer of 1993.
In 1998, wheat import tariffs were increased to 100% from 12%. Even with that action, the government has not authorized the private sector to import wheat.
LIVESTOCK AND FEED. In 1997, 35 commercial feedmills in Saudi Arabia produced a total of 1.6 million to 1.8 million tonnes of feed annually. Feed production is dominated by poultry farms, which are estimated to produce about 70% of all manufactured feed. Large poultry farms produce feed for their own use, while some medium-sized farms sell up to 40% of their output to nearby and smaller poultry farms.
Four major groups account for about 65% of total feed produced in Saudi Arabia. Arabian Agricultural Service Company (ARASCO) is the leading commercial feed producer, with an estimated 16% to 18% market share. Other major feed companies are G.S.F.M.O., Al-Watania Poultry Farm and Al-Fakieh Poultry Farms.
The Saudi feed industry expanded in 1998 with the planned opening of a new 130,000-tonne-per-year feedmill, the first new large-scale project since the early 1990s. In addition, ARASCO and Al-Watania Poultry Farm announced capacity expansions.
The growth in the feed industry is based on several factors, including farm diversification after the changes in grain policy. Substantial price increases in imported milk powder and frozen chicken meat also have encouraged development and growth in Saudi dairy and poultry farms.
With the country's relatively robust population growth rate, the expansion in Saudi demand for poultry meat, and subsequently feed, is expected to continue. The two largest poultry producers are undertaking additional expansion projects to increase broiler production to more than 400,000 tonnes, which is expected to stimulate larger imports of maize and soybean meal.
Despite the expansion in the manufactured feed industry, barley remains an important grain for feed use. Traditional livestock operations, including nomadic herders, account for nearly 80% of total barley consumption. Sheep are the largest barley users, followed by camels. Barley is both a supplement and substitute for pasture.
Saudi Arabia is by far the world's largest barley importer, typically taking between 3.5 million and 5 million tonnes annually. Although G.S.F.M.O. provides production quotas and regulates prices for barley, the production incentives typically cover costs for only the largest, most efficient farmers, and actual output falls short of quota — and domestic demand — every year.
Since early 1991, barley has been sold to users at subsidized and unified prices controlled by the government. But private feed mills that buy barley from the government at fixed prices and mix it with other feeds are free to set their own prices.
In August 1998, G.S.F.M.O. for the first time authorized barley imports by the private sector. The action reportedly was spurred by low world barley prices and the government's desire to reduce the costs to the treasury of subsidizing domestic users.