RIYADH, SAUDI ARABIA — Saudi Arabia produced nearly double the wheat expected in the 2022-23 marketing year and is on track for similar results in 2023-24 as government purchase prices remain high. 

Production totaled 1.18 million tonnes in 2022-23 and is estimated at 1.2 million tonnes in 2023-24, according to a report from the Foreign Agricultural Service (FAS) of the US Department of Agriculture (USDA). The government offered a purchase price of $466.70 per tonne. 

Still, the nation will need to import an estimated 4.63 million tonnes of wheat in 2022-23 and 4.8 million tonnes in 2023-24. 

This February, Modern Mills Co. was the second of the nation’s four recently privatized milling companies to complete an initial public offering. Privatization of the sector started in 2018, with the companies being sold by the Saudi Grains Association (SAGO) to consortiums of investors in 2020 and 2021. 

Privatization is part of a larger plan to raise the contributions of the private sector to the gross domestic product, attract local and international investments and diversify the country’s economy, which is the largest in the Middle East and the 18th largest in the world.  

Diversification includes finding non-oil sources of income for the nation, which relies on oil for 87% of its budget revenues. Agriculture made its largest contribution ever to the GDP in 2022, reaching $26.6 billion, an increase of 38% from the previous year.

The country has adopted multiple strategies and programs to promote sustainable agriculture and improve water management to preserve natural and environmental resources. It faces multiple challenges in expanding agriculture production, including a hot and dry climate with low precipitation, sandy soils with low fertility, high incidence of animal disease and pests and water scarcity.

Saudi Arabia is a net food importing country but is self-sufficient in some areas, including fresh milk, table eggs, dates and vegetables. It is a net importer of wheat, barley, corn and rice.

Crop production, consumption

Since 2018, farmers with less than 50 hectares of farmland can voluntarily produce wheat. Before each planting season, farmers choose between wheat or alfalfa and sell their product to the Saudi Ministry of Environment, Water and Agriculture (MEWA). Because farmers could make more growing alfalfa, wheat production stayed below 1 million tonnes for several years. 

A price of $466.70 per tonne set by the General Food Security Authority (GFSA, formerly SAGO), an agency of MEWA that purchases all locally produced wheat, resulted in a drastic increase in domestic wheat production, the FAS said. 

“Analysts indicate wheat farmers significantly increased their profits this past year, and as long as government purchase prices remain high, domestic wheat production is projected to remain near 1.2 million tonnes,” the FAS said. 

However, to meet domestic demand, Saudi Arabia must import a significant amount of wheat. Currently, GFSA is the exclusive importer of subsidized food grade wheat, but as part of privatizing the import industry, the Saudi Agricultural and Livestock Investment Co. (SALIC) will start taking over wheat purchasing and operation of storage silos. SALIC is the agricultural arm of the Public Investment Fund owned by the country’s sovereign wealth fund. 

In 2023-24, SALIC is expected to supply up to 720,000 tonnes of wheat from Saudi Arabian companies operating farms in foreign countries.

Domestic wheat consumption is estimated at 4.5 million tonnes in 2022-23 and 4.7 million tonnes in 2023-24, with a projected 3% increase annually. Wheat demand has been increasing 5% to 10% per year due to the expanding foodservice sector as hundreds of labor camps are being established throughout Saudi Arabia to build mega projects, resorts and tourist attractions.

In comparison, feed barley consumption dropped more than 18% in 2022-23 to 3.8 million tonnes and is projected to decline another 17% to 3.1 million tonnes in 2023-24. This represents a 56% decline compared to a decade ago when consumption averaged 7 million tonnes, the FAS said. 

The FAS attributes the drop to higher prices compared to other animal feed alternatives; fewer operations as high prices forced 30% of goat and sheep farmers to liquidate their businesses; farmers desire for feed options that produce less waste; and increased consumption of processed feed. 

Barley imports are estimated at 4.1 million tonnes in 2022-23 and 3 million tonnes in 2023-24, a drop of 28%. Russia is the sole supplier as Australia returned to the Chinese market and Ukraine has been unable to ship to Saudi Arabia because of the continued war with Russia. Saudi Arabia does not produce feed barley but does produce 25,000 tonnes for human consumption.

“As the local feed processing sector continues to expand and livestock farmers benefit from different feed options, Post anticipates barley imports will continue to decrease,” the FAS said. 

Corn (maize) continues to be an important feed grain for poultry farms, the FAS said, and is a key feed grain used by commercial feed processors and the domestic dairy industry. Consumption was estimated at 3.4 million tonnes in 2023-24 and is projected to increase 29% to 4.4 million tonnes in 2023-24. 

Consumption is expected to continue to increase significantly over the next several years, the FAS said. Saudi Arabia produces 15,000 tonnes of corn per year for human consumption. 

Imports are expected to hold steady in 2022-23 at 3.6 million tonnes but increase to 4.8 million tonnes in 2023-24 because of expansions in the Saudi poultry farming sector. 

Milling privatization

In 2018, SAGO was approved to sell its flour milling companies as part of the government’s privatization drive started under Vision 2030. Two mills were sold in 2020 for a total of $740.5 million and the last two were sold in 2021 for $800 million. 

Together, the companies have grain storage capacity of 745,000 tonnes and have wheat milling capacity of 15,150 tonnes per day and feed milling capacity of 2,600 tonnes per day. 

Now, two of the companies have completed an IPO and a third is expected this year. First Milling Co. went public in May 2023 with a $266 million IPO. Modern Mills is expected to raise between $288 million and $314 million in its IPO launched at the beginning of this year. 

Privatization is expected to increase the diversity of flour products in the local market, improve food security and service standards to customers. 

All Saudi Arabian wheat, both imported and produced locally, is used exclusively for human consumption, the FAS said. It is mostly consumed in the form of flat bread or as a local hamburger bun known as a Samoli. Western-style bread, including French baguettes and pizza, are also popular. 

Per capita consumption was estimated at 91 kg of wheat flour in 2021-22. While white flour is the bulk of flour consumed in Saudi Arabia, there has been growing demand for whole wheat flour due to its perceived health benefits. 

“It should be noted that Saudi Arabia has one of the highest diabetic and obesity rates in the world,” the FAS said. “As a result, the four flour mills currently operating in the Kingdom have increased their whole wheat production in recent years to meet growing demand.”