Country Focus: Saudi Arabia

by Melissa Alexander
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Modern center pivot irrigators tapping into huge underground aquifers have transformed portions of the Saudi Arabian desert into fields of wheat, barley, fruits and vegetables.

Saudi Arabia has been host to one of the most amazing agricultural success stories of the century. In the case of wheat, the country 10 years ago produced only negligible quantities, mostly on small traditional farms. By 1984-85, Saudi Arabia attained self-sufficiency in wheat and became a wheat exporting nation, thanks to the establishment of large farming enterprises in which the government was major shareholder.

Success has come at a tremendous price. Crop and livestock production and wheat exports are heavily subsidized. But the government's chief aim in agriculture has been to achieve self-sufficiency in basic foodstuffs.

GRAIN SECTOR. Wheat and barley are grown on huge commercial farms which, in addition to the grains, grow fruits and vegetables and may raise dairy cattle, sheep and broilers and layers. The government is a large shareholder in almost all of these concerns. But, private businessmen also have invested heavily in the enterprises.

In addition, many wealthy entrepreneurs and even persons of more modest means have invested in setting up private farms.

Commercial farmers are beneficiaries of an array of financial supports from low land prices and easy credit to help establish their farms, to generous crop supports and subsidies covering as much as half the costs of purchasing irrigation equipment, farm machinery, fertilizers and chemicals.

WHEAT. In 1979, Saudi Arabia imported more than 1 million tonnes of bread-making wheat to be milled in its three newly constructed flour mills. Indications were that much more wheat would need to be imported.

But in 1980, in order to jump start wheat production and stimulate the establishment of large commercial farms, the government announced a wheat procurement price of $1,050 per tonne, nearly twice the previous level.

The Grain Silos and Flour Mills Organization, an arm of the Ministry of Agriculture and Water that had been established to set up and operate flour mills and to import and store wheat destined for the mills, became increasingly important in its other capacity as the sole authorized purchaser and trader of Saudi Arabia-produced wheat and barley.

The stimulus worked. In 1980, Saudi wheat production stood at 142,000 tonnes. Four years later, wheat production had increased nearly ten-fold, to 1.4 million tonnes, and the Kingdom became a wheat exporter.

Wheat production topped 2 million tonnes the next year, in 1985, and the 4-million-tonne level was reached in 1992.

Since 1986, the government has been trying to reduce the production of wheat and increase the production of barley.

Because of the rapid growth in the livestock industry, Saudi Arabia has been purchasing from abroad tremendous amounts of barley, recently about 6 million tonnes per year. Barley output, however, has struggled to top 400,000 tonnes.

The reason for the discrepancy between wheat and barley production is simply price. The procurement price for barley is about half that of wheat. There has been heretofore little incentive for growers voluntarily to divert land from wheat to barley.

There are two procurement prices for wheat. Large state-sponsored commercial farms receive $400 per tonne. Smaller producers receive $533 per tonne. By comparison, the procurement price for barley is $267 per tonne.

Disposing of surplus wheat has been a costly enterprise. With the average wheat price running at about $500 per tonne and the average export price running at about $150 per tonne, the government loses about $350 on each tonne it sells abroad.

Efforts to cut wheat production were intensified after the 4.1-million-tonne harvest of 1992. In December 1992, the government informed the major commercial farms that they would be required to cut back or in some cases even drop wheat production in favor of barley. However, the government's change in policy occurred after much of the 1993 wheat crop had been planted, so while the crop is projected to be smaller this year, the full impact of the change in direction won't be felt until next year.

Even before the government's decree, indications were that G.S.F.M.O. would restrict its purchases of the 1992 harvested wheat to between 3 million and 3.5 million tonnes, leaving 500,000 to 1 million tonnes in the hands of producers. Expectations are that government purchases from the 1993 crop are likely to be limited to an even lower level, perhaps 2 million to 2.5 million tonnes, forcing growers to consider alternative crops, especially barley. In fact, barley production is expected to nearly double in 1993 from 1992, even though the procurement prices for wheat and barley have not changed.

FLOUR MILLING. G.S.F.M.O. opened the country's first flour mill at Riyadh in 1977. A year later, a mill at Dammam opened. A mill at Jeddah was built in 1979. The three plants brought Saudi Arabia's milling capacity to 2,160 tonnes per day. In 1985, milling capacity increased to 3,300 tonnes per day. Today, there are 15 flour mills located at Riyadh, Dammam, Qassim, Jeddah and Khamis Mushayt with combined daily capacity of 5,400 tonnes.

Four different types of flour are produced: 70% extraction family flour, a straight flour of 75% extraction, a dark flour of 85% extraction and whole wheat flour of 95% extraction.

Flour and bread prices are subsidized.

Beginning in 1988, tariffs were implemented that have virtually eliminated imports of bakery products, which had averaged $80 million worth per year in the 1985-87 period.

FEED MILLING. In 1992, Saudi feed millers manufactured 1.6 million tonnes of finished feed comprising 1.2 million tonnes of poultry feed, 235,000 tonnes of dairy cattle feed and 143,000 tonnes of sheep feed.

In addition, traditional sector animals such as camels, cattle, sheep and goats consume some 2.1 million tonnes of barley and 3.9 million tonnes of alfalfa.

GRAIN STORAGE. G.S.F.M.O. indicated it maintains about 2.4 million tonnes in grain storage capacity, principally for wheat. There also is considerable on-farm storage, which is becoming even more important now that growers are finding that they may have to store some grain that the G.S.F.M.O. no longer intends to purchase.

EXPORTS. G.S.F.M.O. is the sole authorized exporter of wheat, although it subcontracts much export business through three private multinational grain companies. But growing stocks in private hands may result in a loosening of this monopoly on trade, enabling farmers to dispose of wheat not purchased by G.S.F.M.O. through alternative export channels.