Saudi Arabia: A Static Wheat Consumption
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In March 2022, the Saudi Arabian Grains Organization (SAGO) increased its GPP of the locally produced Wheat for the second time last year from SAR 1,550 ($413.33) to SAR 1,700 ($453.33) per MT delivered at nearby SAGO silos. Earlier last year, the price was increased from approximately SAR1,306 ($348.3) to SAR1,550 ($413.33) per MT. Though SAGO purchased domestically produced Wheat at SAR1,700 ($453.33) per MT in 2022, farmers received a net payment of approximately SAR1,615 ($430.67) per MT after a 5 percent deduction for Zakhat (Islamic religious tax). An additional four percent is deducted in case of foreign matter (impurity). In 2021, SAGO paid $348.3 per MT for local Wheat purchases. The domestic purchase price is purposefully higher than international prices. The average CFR import price for SAGO purchased Wheat for MY 2021/22 was $337 (USD) per MT. The SAGO Board of Directors updates the local Wheat purchase for each production season in early January.
Wheat consumption has been static due to the continued departure of expatriate workers and their families due to strict policy measures to reduce the foreign workforce. Demand was also constrained by an increase in the cost of living in Saudi Arabia over the past few years due to sharp increases in utility charges, the implementation of a 15% value-added tax (VAT) in January 2020, and a continued increase in domestic petroleum prices. Preferences for other foods (e.g., imported pasta, rice, fruits, and vegetables) also decreased the demand for Wheat. Wheat is primarily consumed in the form of a flat (pita) bread or a local hamburger bun known as a “Samoli.” Western-style bread, such as French baguettes and pizza, are also popular.
The annual per capita Wheat consumption in Saudi Arabia (total population – 35 million) was estimated at approximately 100 kg in 2020. White flour constitutes the bulk of Wheat flour consumed in Saudi Arabia. However, in recent years, there has been a growing demand for whole-Wheat flour due to its perceived health benefits, particularly by health-conscious consumers and those with health conditions such as diabetes and obesity. It should be noted that Saudi Arabia has one of the highest diabetic and obesity rates in the world. As a result, the four flour mills currently operating in the Kingdom increased their whole-Wheat production in recent years to meet growing demand.
In November 2018, Saudi Arabia partially rescinded a ban on domestic Wheat production, which had been in place since the crop year 2015/16, over concerns about the country’s scarce aquafer water resource reserve. Saudi’s decision to reduce domestic forage cultivation by 42.5% eliminated large producers from domestic forage production, although smaller-sized farmers were exempt from this regulation. Domestic Wheat and forage production are entirely dependent on irrigation. MEWA estimated that approximately 10.75 MMT of forage was produced in Saudi Arabia in 2015/16.
Saudi Arabian Wheat Stocks
SAGO owns and operates silo complexes in major cities around Saudi Arabia. The total silo capacity in the Kingdom was 3.45 MMT by the end of 2020. SAGO owns and operates silos with a total storage capacity of 2.705 MMT, while the four private flour mills have a combined storage capacity of 745,000 MT. The silos are in 14 locations throughout Saudi Arabia.
According to AgFlow data, Saudi Arabia imported 0.6 million tons of Wheat in Jan-Feb 2023. Russia led with 0.46 million tons, followed by Brazil (67,389 tons) and Ukraine (64,175 tons). SAGO considers the world Wheat supply to be reliable and no longer strives to maintain strategic Wheat reserves equal to annual consumption. Although SAGO does not release its actual Wheat reserve stock levels, it is believed to maintain stocks for at least six months.
Other sources: USDA
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