Wheat and Feed Market In Saudi Arabia June 2012 Grain Silos & Flour Mills Organization Kingdom of Saudi Arabia International Grains Council By H.E Eng. Waleed El Khereiji Director General of Grain Silos & Flour mills Organization

GSFMO was established in 1972, its main function is to ensure the steady supply of wheat flour to the entire population of the Kingdom through a well- regulated mechanism and a careful monitoring system in place. To achieve this, GSFMO set up wheat storage and wheat grinding facilities at different locations of the Kingdom What is GSFMO ? The objectives of GSFMO were : To form an integral industry of grain storage, flour production and processing of animal feed. 4 To establish any other relevant food industries. To market its products. To purchase grains and create a convenient reserve stock to face emergency circumstances. 5 To meet the goals of the approved agricultural policy.

3 Wheat and Wheat Flour Markets in Saudi Arabia Imported Wheat Local Wheat 1.97 mt in mt in 2011 Grains Silos Capacity of storage: 2.52 m.t GSFMO is the authorized buyer of wheat and the only flour producer in Saudi Arabia. Flour Mills Capacity of production: 11,280 ton /day (2.28 m.t in 2011) - Located in all GSFMO’s branches (11 branches) which cover most of the kingdom - Located in 9 branches of GSFMO Number of Flour Clients : 8200 Bakeries :58% (Subsidized Bread) Food Industry : 14% Hyper and Mini Markets :16% Desserts, Pastries and Restaurants :12%

4 GSFMO’s Products ( Flour & Other Wheat Derivatives) GSFMO produces many wheat derivatives like : -Jareesh - Harees -Bran for Human consumption Flour Products Other Wheat Derivatives GSFMO produces many varieties of flour as follows: -Powder flour (75-80% Extraction ) -Fine flour (70-74% Extraction ) -Ordinary Flour (85% Extraction) -Whole Wheat Flour (95% Extraction) Flour is marketed according to customer as follows: - For commercial customer in bulk / in 45 Kg bags - For domestic customers in small bags of 10, 5, 2 & 1 Kg

5 Wheat Purchase & Flour Sales In 20 Years Graph shows that between 1991 and 2011, wheat demand and flour sales have doubled, the reason being increase in population, per capita income and number of pilgrams of two holy places. MT The gap represents wheat storage & Extraction rate of flour

6 Governmental Policy for Wheat Purchases In 2008, Saudi government adopted a new policy based on gradual reduction in growing wheat domestically because of the scarcity of water. The new policy envisaged replacement of local procurement by imports from abroad and there is plan that by 2016 all wheat requirement will be meet by imports. following table shows expected local and imported wheat demand: Imported Wheat (Expected) (MT) Local Wheat (Expected) (MT) Year

7 Replacement Trend of Local Wheat by Imported Wheat On the other hand, the local procurement of wheat was decreased from 1.72 mt in 2008 to around one million ton in the last 3 years. GSFMO started applying the new policy in 2008 by importing 303 thousand ton of wheat. Thereafter this quantity was increased six fold in 2009 to 1.92 mt and around 2 mt in the last 2 years. Imported Wheat

8 Imported Wheat : Countries of origins 2011 In the last year, GSFMO imported about 1.97 mt and the countries of origins were EU (36%), Canada (26%), USA (14%), Australia (12%), Argentina(6%) and Brazil (6%).

Structure of Feed Market in Saudi Arabia Manufactured Feed Feed Barley Saudi Arabia is the largest importer of feed barley in the world (7,2 mt) represents a half of world feed trade. Private sector The Saudi government subsidies barley which is imported by private sector and it is sold to domestic distributors at a government subsidized price. (SR 40 =USD 10,7/ Bage 40 KG) Private sector GSFMO Manufactured Feed Bran Manufactured Feed 9 The ministry of finance decided to import and distribute feed grade wheat in order to reduce the demand for barley. So Saudi Arabia’s barley imports for 2012/2013 is forecasted to decrease by 9 percent to 6,5 million MT compared to 7,2 million MT in 2011/2012.

10 GSFMO’s Production of Bran & manufactured Feed Graph shows that between 1991 and 2011, the production of Bran & manufactured feed have doubled as a result of : - Increase Flour production - New Plans for producing manufactured feed

Challenges & Future Currently, Saudi Arabia has a storage capacity of 2.5 million tons of wheat, which can meet the consumption for 10 months. Therefore, work is underway to construct new silos some of which are at main Saudi ports with total storage capacity of 710,000 tons. So, the total storage capacity will reach 3.2 million tons that will be enough for annual wheat consumption. 2.5 Mt Expan.& New plans 710 th. ton 250Makkah 120Al-Ahsa 60Jazan 140Jeddah 140Dammam Expansions New Plans th.ton 1 st Challenge : Increasing of storage capacity to cover annual consumption 11

12 Challenges & Future Saudi Arabia seeks to privatize flour mills industry by selling flour mills to the private sector in a step to attract and encourage investments to this sector and strengthen competition. 2 nd Challenge : Privatization of Flour Mills Market GSFMO has started the preparation work for the privatization through an elaborate program that passes through different stages: 1- working for separating the processes of milling from wheat storage silos. 2- establish flour groups of milling companies.

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