Saudi food imports set to grow after 2009 peak
Posted by Zawya
Emirates Business 24-7, 27 July 2010


Saudi Arabia's food imports bill climbed to an all-time high of more than SR65 billion in 2009 and the value is expected to surge in the next years because of high population growth and a decision to halt local wheat production.

Figures released ahead of the annual Saudi Farming Exhibition due to be held in October showed farm imports accounted for nearly 15 per cent of the kingdom's total imports, the fourth largest component of imports.

The figures showed the farming and food sector in Saudi Arabia, which constitutes more than a fifth of the total Arab economy, has swelled by nearly 18.5 per cent annually over the past decade mainly because of relatively rapid population growth and a steady increase in visitors to the country.

"Last year, the value of food imports by Saudi Arabia peaked at SR65.25bn as a result of a steady population growth, which is estimated at three per cent, as well as economic growth and high per capita income," said Khaled Daou, Director of the Exhibition, which will be held in Riyadh from October 4 to 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."

Quoted by Saudi newspapers, Daou said there are forecasts Saudi Arabia's population would grow by nearly 15.4 per cent in the next five years.

"This means that we will see an increase in the food import value and an intensified drive to achieve food security in the kingdom," he said.

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Saudi Arabia is the largest Arab food importer given its rapid population growth and poor arable land as it is mostly a desert. Last year, the kingdom's farm imports accounted for nearly 45 per cent of the total Arab food imports of about $39bn (Dh143bn), according to the Arab League.

Jolted by a surge in global food prices in 2007 and 2008, Saudi Arabia has turned abroad to ease reliance on farm imports by investing in agricultural projects in Sudan and other fertile countries.

But analysts believe such projects would not have a strong downward impact on imports as they will be offset by Riyadh's decision to halt local wheat production and rely on foreign imports to preserve its dwindling water wealth.

"There is no doubt this decision will only aggravate the kingdom's food import bill as the plan is to rely totally on imported wheat," a Riyadh-based economist said.

Saudi Arabia, which sits atop more than a fifth of the world's proven oil wealth, had produced nearly three million tonnes of wheat per year to meet domestic needs, but output is expected to plunge to one million tonnes this year following the government's decision to stop subsidising local production.

In the next two years, output could dip further and the country will become almost totally reliant on imports, mainly from the West.

"The decision we took two years ago to halt local wheat output is final and clear... there is no going back," Saudi Minister of Agriculture, Fahd Balghaneem, said in recent local press comments. "The country is now giving priority to water security over food security. This was a cabinet decision, which also directed us to stop producing wheat locally."

Balghaneem said Saudi Arabia, one of the poorest nations in water resources, imported in excess of one million tonnes of wheat last year and imports are projected to surge this year as local output is steadily declining.

"The decline is faster than the 12.5 per cent we had set annually. Farmers appear to realise that wheat cultivation is no longer feasible after the state decided to stop subsidies. Many of them have quit their farms and this means local production could drop to only one million tonnes this year."

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 programme that has allowed it to be self-sufficient but drained its scarce desert water wealth.

Poor ground water resources have forced Saudi Arabia to rely on sea desalination facilities, for which it has invested hundreds of billions of dollars. The country is now the world's largest producer of desalinated water, which meets 70 per cent of its present drinking water needs.

The kingdom's 30 desalination plants pump more than 600 million gallons of water daily (over one billion cubic metres a year) through nearly 2,000 miles of pipeline. More than 50 cities and distribution centres in Saudi Arabia receive their water from these plants.

Per capita water consumption in Saudi Arabia is among the highest in the world. Water is heavily subsidised and while one cubic metre of water costs about $1.08 to produce, it is sold for only about three cents.

By Nadim Kawach

© Emirates Business 24/7 2010

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