Boston, MA -- (SBWIRE) -- 05/30/2014 -- Saudi Arabia will increasingly be dependent on global grain supply, as the country has decided to phase out domestic grain production in a bid to preserve the country's water supply. The government has not abandoned its strategy of self-sufficiency in poultry and has been ramping up incentives to expand capacity production. This strategy has paid off, as the three major producers in the sector have all started heavy investment initiatives. We believe Saudi Arabia will find sufficient grain supply from the Black Sea region and the EU to supply its meat and food processing industry in the coming years. However, the country will remain highly vulnerable to volatile grain and feed prices. Recent spikes in feed prices have turned us more cautious on margins for dairy and livestock producers in the country, especially those that import inputs from abroad.

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Key Forecasts

- Wheat production growth to 2017/18: -43.8% to 393,700 tonnes. Wheat production will continue to decrease in the coming years on the back of the government's programme to phase out production.
- Corn consumption growth to 2018: 22.8% to 2.8mn tonnes. Corn consumption will be mainly driven by the strong growth of the poultry sector, as corn is a major feed ingredient.
- Poultry production growth to 2017/18: 52.0% to 865,100 tonnes. This spectacular growth will mainly come from the effects of capacity expansion at the three major poultry farms (Al-Watania, Al- Fakieh and Almarai), along with continuous government support.
- BMI universe agribusiness market value: USD1.7bn in 2014, forecast to increase by 3.7% on average per year between 2014 and 2018.
- 2014 real GDP growth: 4.3% year-on-year (y-o-y), up from 3.8% in 2013, projected to average 3.2% from 2014 to 2018.
- 2014 consumer price inflation: 4.0% average, up from 3.3% in 2013, projected to average 4.0% 2014 to 2018.

Industry Developments

Saudi Arabia announced that it will diversify its sources for wheat imports and will not rely on a particular supplier. The Saudi Grain Silos and Flour Mills Organization (GSFMO) has revealed the kingdom's wheat import policy, indicating that it will hedge against fluctuations of wheat prices in the world markets and will procure its wheat requirements through transparent international tenders. Wheat will be procured through 'transparent international tenders', without relying on any particular supplier. Since resuming its wheat imports in 2008, Saudi Arabia imported about 10.5mn tonnes from various sources, including the EU, Australia, Brazil, Argentina and the US.

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