GIEWS Country Brief: Saudi Arabia 21-March-2016


  • Phasing out of wheat production completed

  • Cereal import requirements forecast at high levels in 2015/16

  • Plans to gradually cut some subsidies announced, food prices mostly stable for now

Wheat production phased out

Saudi Arabia implemented the 2008 Government decree to completely terminate wheat cultivation by 2016 by gradually reducing wheat production quotas for registered farmers. The 2014 crop was the last locally grown crop purchased. The measure reflects strong concern over the depletion of local water reserves which were used to irrigate wheat production. Some farmers reportedly switched from wheat to forage crops which consume more water than wheat. In December 2015, the Ministry of Agriculture was instructed to issue a three‑year phase out plan to terminate local production of green fodder by 2019. The Government estimates that elimination of green fodder production would save about 7 billion cubic meters of water annually.

No penalties were announced for farmers who continue growing wheat after 2015. A small crop of no more than 30 000 tonnes for traditional specialty bakery products is expected to prevail. Wheat farmers are encouraged to engage in alternative sustainable production activities such as greenhouse farming or production of fruits and vegetables using advanced drip irrigation techniques.

Elsewhere, in November 2015 the Saudi Grain Silos and Flour Mills Organization (GSFMO) was restructured and renamed the Saudi Arabia Grains Organization (SAGO). SAGO maintains the exclusive authority of the Government agency to import subsidized milling wheat, as well as to own and operate wheat silos in the country. The restructuration set up four milling companies that will be privatized via a bidding process. Mills would be allowed to import wheat for non‑subsidized flour. At the end of 2014 the total combined storage capacity of GSFMO silos was 3.1 million tonnes, compared to about 1 million tonnes in 2011. Contracts were signed for additional silos bringing the total capacity to 3.7 million tonnes by the end of 2016.

In light of decreasing domestic production, strong domestic demand and environmental concerns, Saudi Arabia is encouraging agricultural investments and production abroad for re‑export to Saudi Arabia. This initiative targets wheat, rice, barley, yellow maize, soybeans and green forage.

Cereal imports to remain high in 2015/16

Cereal import requirements in the 2015/16 marketing year (July/June) are forecast at 17.1 million tonnes, about 0.5 million tonnes more than in the previous year and well above average. Imports of barley and maize, mainly used for feed, constitute the bulk of the cereal imports and are forecast at 8 million tonnes and 3.5 million tonnes, respectively. The Government has been encouraging the use of processed feed instead of raw barley to reduce barley imports by 1.5 million tonnes by 2020. Wheat imports are also expected to remain high at 3.3 million tonnes (although slightly lower than the 3.45 million tonnes imported in 2014/15 due to high stocks), while rice imports are forecast at an above-average level of almost 1.5 million tonnes.

Plans to gradually cut some subsidies announced, food prices mostly stable for now

In December 2015 the Government announced that it plans to gradually cut subsidies, starting with a 50 percent increase in petrol prices from January 2016, in an effort to counter decreases in oil revenues. Consequently, the overall inflation increased from its average of 2.2 percent in 2015 to 4.3 percent in January 2016 and 4.2 percent in February 2016. Food price inflation in January 2016 recorded an increase of 1.3 percent. Prices of wheat flour have not changed for over 30 years, wholesaling 1 kg of consumer packed wheat flour between USD 0.27 and USD 0.33 per kg.