Boston, MA -- (SBWIRE) -- 12/25/2013 -- 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 2016/17: -60.2% to 437,400 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 2017: 34.6% to 2.7mn 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 2016/17: 79.7% to 808,500 tonnes. This spectacular growth will mainly come from the effects of three major poultry farms' (Al-Watania, Al-Fakieh and Almarai) capacity expansion, along with continuous government support.
- BMI universe agribusiness market value: US$2.23bn in 2014, forecast to increase by 5.9% on average per year between 2013 and 2017.
- 2014 real GDP growth: 4.3% year-on-year (y-o-y), up from 3.6% in 2013, projected to average 3.2% from 2013 to 2017.
- 2014 consumer price inflation: 4.0% average, down from 4.1% in 2013, projected to average 4.0% 2013 to 2017.

Key Revisions To Forecasts

- We now cover historic and forecast data for beef and veal production and consumption in Saudi Arabia. Beef production is very low in the country and broadly stagnates around 25,000 tonnes a year, due to strong constraints to output. Costs of production are elevated due to the constant heat and the need to import the entire feed needs. Out to 2016/17, we forecast production to grow by 10.0% on the 2011/12 level, to 27,500 tonnes.

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