Saudi Arabia ends domestic wheat production program

by World Grain Staff
Share This:
Search for similar articles by keyword: [GSFMO], [USDA report]

WASHINGTON, D.C., U.S. — In market year 2015-16, Saudi Arabia ended its domestic wheat production program that lasted for more than three decades, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in a March 14 report. A very small number of Saudi farmers, however, are expected to continue their wheat production to supply local artisanal mills. Saudi wheat imports for market year 2015-16 are projected to be around 3 million tonnes, a decline of about 14% from a year earlier due to large carryover stocks.

The Saudi Arabian government ended its domestic wheat production and purchase programs, as was specified in the decree # 335 of 2007. The decree stipulated that the Saudi Grain Silos and Flour Mills Organization (GSFMO) would reduce wheat production quotas for registered farmers by 12.5% annually starting from market year 2007-08 in order to end wheat cultivation by the beginning market year 2015-16. The main reason for the policy change was a strong concern over the depletion of the country’s scarce water reserves, as the wheat crop is 100% irrigated. This policy was a drastic departure from the country’s longstanding strategy of achieving wheat self-sufficiency that has been pursued since the early 1980s. The GSFMO was restructured and renamed as the Saudi Arabia Grains Organization (SAGO) in November 2015.

SAGO is the exclusive importer of food grade wheat in Saudi Arabia. The organization imports both hard and soft wheat directly through public tenders open to registered international exporters and it does not buy through grain brokers. SAGO has been buying wheat from various origins including the E.U., North America, South America and Australia. The organization imports wheat through two main ports, the Jeddah Islamic Seaport on the Red Sea and the Dammam King Abdul Aziz Seaport on the Arabian Gulf. SAGO has been making plans to increase the number of Saudi seaports that can receive imported wheat to five by adding three smaller seaports in Diba, Jazan and Yanbu (all located on the Red Sea) by 2018. This year, SAGO will import some wheat through the Port of Jazan.

Wheat is an important item in the Saudi diet, the report said. It is mostly consumed in the form of flat (pita) bread or local hamburger buns known as “Samoli” and other western-style bread such as French baguettes and pizza. The average per capita consumption of wheat in Saudi Arabia is currently estimated at about 298 grams per day, or about 109 kg annually. Total Saudi wheat consumption in market year 2014-15 was estimated at about 3.35 million tonnes and is projected to increase by 3% in market year 2015-16. It should be noted that Saudi Arabia has not imported feed wheat since market year 2011-12. The report projects wheat residue to remain at about 55,000 tonnes in marker year 2015-16.

The SAGO owns and operates silo complexes in major cities around Saudi Arabia with a total combined storage capacity of 3.1 million tonnes at the end of 2014, an increase of about 70% over 2011. SAGO has signed contracts to build five additional silos in Makkah, Qassim, Jazan, Aseer, and Al-Hasa, which will increase the total storage capacity to 3.7 million tonnes by the end of 2016. Currently, SAGO maintains more than 1.8 million tonnes in strategic wheat stocks but it has plans to increase it to close to the annual wheat consumption level in market year 2016-17.

Partners