Flour, bread prices may soon rise in Saudi Arabia

by Arvin Donley
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RIYADH, SAUDI ARABIA — The privatization of government flour mills in Saudi Arabia may soon change the prices of wheat flour or bread in that country, according to a March 20 Global Agricultural Information Network report from the U.S. Department of Agriculture.

Currently, 500 grams of pita bread or samoli is sold for 1 Saudi riyal, or 27¢. Some government officials indicate that the fair price should be 67¢, the report said. According to the Saudi National Transformation Program 2020 launched in 2016, the government plans to end all subsidies it pays to consumers by the end of 2020.

In 2015, the Saudi government approved the establishment of four milling companies and restructured the Grain Silos and Flour Mills Organization under a new name, the Saudi Grains Organization (SAGO). The Saudi government authorized the Public Investment Fund (PIF) to set up four flour milling companies. The PIF completed the required restructuring of the four companies, which have commenced operating independently.

The PIF reportedly has finalized required procedures to sell the mills to interested buyers through a competitive bidding process before the end of this year. Foreign investors are allowed to partner with Saudi investors and co-own and operate these flour mills, the report said, noting that foreign investors are allowed up to 49% ownership in the flour mills.

If the government subsidy on bread ends, the flour mills will be able to import wheat and sell bread at market prices without government intervention, which will end SAGO’s monopoly on wheat imports and bread price controls.

The report noted that large bakeries and industrial users purchase wheat flour directly from SAGO mills, while smaller bakeries and retailers receive their assigned quotas from SAGO-appointed distributors. SAGO’s wholesale prices vary based on the flour type and extraction rate.

It said the wholesale price of a kilogram of consumer-packed white wheat flour increased from 27¢ to 40¢ in 2017. Prices to bakers and industrial clients have not changed for over three decades, the report said.

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