Saudi government support will remain the decisive factor with regard to the country's production and consumption of agricultural commodities, the “Saudi Arabia Agribusiness Report Q4 2010” released by Companiesandmarkets.com on Thursday said. Recent data showed farm imports accounted for nearly 15 percent of the Kingdom's total imports, the fourth largest component of imports. Last year, the Kingdom's farm imports accounted for nearly 45 percent of the total Arab food imports of about $39 billion, according to the Arab League. With a population of more than 26 million at the end of last year, Saudi Arabia has announced that it would begin importing wheat at the start of 2009 and gradually eliminate a 25-year grain program that has allowed it to be self-sufficient but drained its scarce water wealth. The Agribusiness Report further said the Kingdom's wheat production industry “continues its collapse” following the removal of state supports in 2008. Wheat production dropped to 1.0 million tons in 2009/10, according to latest figures. The value of food imports by Saudi Arabia in 2009 peaked at SR65.25 billion as a result of a steady population growth, which is estimated at three percent, as well as economic growth and high per capita income,” said Khaled Daou, director of the Saudi Farming Exhibition, which will be held in Riyadh on Oct. 4-7. “We expect a further increase in demand for food in the coming five years because this growth and the increase in the number of visitors, which exceeded 10 million last year. Another factor is the expected rise in the number of foreign workers needed for the growing number of projects,” he added. In 2010/11, wheat production would slip to 691,000 tons. By 2013/14, this is expected to have reached 333,000 tons, representing an 80.6 percent fall over our 2008/09-2013/14 outlook window, the report noted. The report noted that the state is also trying to end the country's dependence on barley imports by slashing import subsidies on the grain, while raising them on alternative feed crops, the report added. The Kingdom is by far the world's number one barley importer, the report said. It stressed that though there has been talk of the country axing barley import subsidies entirely, the government must perform a balancing act of sorts. “If subsidies are removed too quickly, buyers may find themselves paying a heavy financial cost if they are unable to source enough cheap alternative feed in time,” the report noted. Nevertheless, the report forecast that the country's barley imports and barley consumption will decline by 2014 as alternative feed types begin to look more price competitive against barley. Although government loans and subsidies encourage domestic producers to expand, most major Saudi investment in poultry production is set to take place overseas in coming years, and growth over our forecast period will be modest. Between 2009 and 2014, production is forecast is increase by a relatively moderate 9.2 percent to 623,000 tons. It forecast that the poultry industry would also experience healthy growth - albeit on farms located abroad and “built on the back of hefty state support.” With corn a popular source of poultry feed, the report forecast that consumption would rise to 1.88 million tons in 2010. Consumption to grow to 2.19 million tons by 2014, representing strong growth of 29 percent over the five years. In 2009, corn consumption is estimated at 1.70 million tons. Moreover, milk production in 2010 is forecast to increase marginally, by 1.6 percent year-on-year (y-o-y) to reach 1.36 million tons. To 2014, production would increase by 12.2 percent to reach 1.50 million tons. Over the same period, demand is expected to outpace supply - consumption is expected to grow 18.8 percent to reach 1.67 million tons in 2014, entailing imports of around 170,000 tons of milk, the report said. It further said that continued foreign investment in the Saudi dairy market demonstrates “much confidence in the potential for demand to grow.” Most recently, it pointed out, Dairy Queen announced it would be opening its first store in Saudi Arabia in the first half of 2011. By 2015, the chain expects to have 15 branches in the country. Besides, the Kingdom's real GDP growth is projected to move to 2.2 percent in 2010 from 0.1 percent in 2009. Continued foreign investment in the Saudi dairy market shows there remains much confidence in the potential for demand to grow. Most recently, Dairy Queen announced it would be opening its first store in Saudi Arabia in the first half of 2011. By 2015, the chain expects to have 15 branches in the country.
