0. Grain Silos & Flour Mills Organization (GSFMO) Kingdom of Saudi Arabia
Wheat and Feed Market in Saudi Arabia
By H.E. Eng. Waleed El Khereiji
Director General of Grain Silos & Flour mills Organization
Saudi French Opportunities Forum (9-12th April 2013)

1. GSFMO Background & Overview KSA Wheat & Flour Market Overview GSFMO Privatization Program Next Steps & Implications
[PLACEHOLDER TEXT]

2. GSFMO is a national institution that aims to supply wheat and flour to the entire population of the Kingdom of Saudi Arabia
To form an integral industry of grain storage, flour production and processing of animal feed
GSFMO Overview and Objectives
To establish any other relevant food industries
GSFMO Overview I
Grain Silos and Flour Mills Organization (GSFMO) is considered one of the leading national institutions that has a prominent role in the achievement of economic development in the Kingdom of Saudi Arabia, and in the provision of citizens’ needs of most important food materials
GSFMO was established by the Royal Decree issued on February 1972, which was prepared by the government to provide all means of development and progress to the Saudi people
To market its products II
GSFMO Objectives
To purchase grains and create a convenient reserve stock to face emergency circumstances
III
To meet the goals of the approved agricultural policy IV V

3. GSFMO fulfills its mandate through managing the full wheat and flour operating sector value chain
GSFMO Roles and Responsibilities
KSA Wheat Sector Operations Value Chain
Storage
Milling
Distribution and Sales
Production
Procurement
Transpo-rtation
Roles and Responsibilities
Purchase wheat from local farmers according to a set price and import the remaining demand from international suppliers for KSA
Operate all the flour mills in Saudi Arabia and ensure adequate investments to maintain enough supply to satisfy the growing demand
Manage all wheat storage operations in KSA, both strategic and operational storage, in order to satisfy the increasing demand
Coordinate with Ministry of Agriculture on local wheat procurement, in order to complement it with international imports
Coordinate annually with Ministry of Finance on budget preparation and with Ministry of Planning and Economy on Strategies
Enforce food quality regulations at the point of purchase in storage silos and import tenders, such as protein content, weight, moisture, falling number, etc.
Implement directives by the Ministry of Health regarding food additives, e.g. vitamin D, Folic Acid, etc.
Private Sector Farmers
Grain Silos & Flour Mills Organization
Grain Silos & Flour Mills Organization
Grain Silos & Flour Mills Organization
Grain Silos & Flour Mills Organization
Grain Silos & Flour Mills Organization
Entities Involved
GSFMO Involved

4. GSFMO operates 14 branches with total capacity of ~13K MT/day of flour milling, ~3 MMT for wheat storage and ~3K MT/day for feed
GSFMO Flour Mills, Silos and Feed Mills Capacities
Flour Mills Capacities
(MT/day) (2013)
Silos Capacities
(000’ MT) (2013)
Feed Mills Capacities
(MT/day) (2013)
GSFMO Presence across Saudi Arabia
Khamis MushaitKhamis Mushait
Tabuk
600 40
Riyadh
300
Madina 60
Madina
600
Northern Province
Jawf
Dammam 80
Hail
600
Tabuk
100
Hail
Dammam
Jeddah
300
Tabuk
Jawf
600
Qassim
Jawf
100
Madina
Riyadh
Qassim
900
Jeddah
120
Dammam
300
Kharj
Jumoum
1,200
Kharj
200
Jumoum
Jeddah
Jumoum
250
Wadi El Dawaser
Dammam
1,350
Khamis Mushait
Hail
300
Qassim
600
Khamis MushaitKhamis Mushait
1,650
Qassim
485
Najran
Riyadh
2,550
Wadi El DawaserWadi El Dawaser
500
Khamis MushaitKhamis Mushait
Jazan
1,400
Jeddah
2,580
Riyadh
535
Total
12,630
Total
2,770
Total
2,900
Flour Mill
Silo
Feed Mill

5. Other Wheat Derivatives
GSFMO offers a wide range of Flour products, Feed products and other Wheat Derivatives to its clients
GSFMO Products
Flour Products
GSFMO produces varieties of flour:
Powder flour (75-80% Extraction)
Fine flour (70-74% Extraction)
Ordinary Flour (85% Extraction)
Whole Wheat Flour (95% Extr.) I II
III
Feed Products
GSFMO produces feed-pound (50 kilograms) of high-quality poultry feed and livestock feed (fattening / double), in addition to other feed products
GSFMO Products
Other Wheat Derivatives
GSFMO produces a number of wheat derivatives including:
Jareesh
Harees
Bran for Human consumption

6. Local Wheat Vs. Imported Wheat Supply
As the sole wheat procurer, GSFMO is gradually shifting towards 100% imports of international wheat by end of 2016
GSFMO Wheat Supply
Local Wheat Vs. Imported Wheat Supply
(MMT) (2008 – 2016)
Comments
Historical
Planned
In 2008, the Saudi government adopted a new policy to gradually reduce domestic wheat growing due to water scarcity
The new policy envisaged replacement of domestic wheat procurement through imports; by all of the Kingdom’s wheat demand will be met by imports
GSFMO started applying the new policy in 2008 by importing thousand tons of wheat; this quantity was increased six fold in 2009 to reach 1.92 MMT
On the other hand, the local procurement of wheat was decreased from 1.72 million tons in 2008 to thousand tons in 2012
2008
2009
2010
2011
2012
2013
2014
2015
2016
Local Wheat
Imported Wheat
Local Wheat (%)
85%
33%
40%
36%
28%
25%
18%
12% 0%
Imported Wheat (%)
15%
67%
60%
64%
72%
75%
82%
88%
100%

7. GSFMO Imported Wheat – By Country
GSFMO ensures its wheat supply from several countries and is currently looking to expand its imports base to include soft wheat
GSFMO Sources of Wheat
GSFMO Imported Wheat – By Country
(Percentage) (2012)
Import of Soft Wheat
GSFMO has opened up new channels for soft wheat exporters, such as France, by including soft wheat for the first time in its last tender
The kingdom is studying local consumer demand to assess potential needs for soft wheat, which is suited for products such as biscuits, and accordingly, GSFMO will gradually increase imports of soft wheat
Saudi flour mills were traditionally built to process hard wheat, but the newly established flour mills are able to handle both hard and soft wheat
USA
Argentina
40%
European Union
Australia
29%
Canada

8. GSFMO Background & Overview KSA Wheat & Flour Market Overview GSFMO Privatization Program Next Steps & Implications
[PLACEHOLDER TEXT]

9. Saudi Population Growth
KSA’s population is expected to grow at 2.4% per annum reaching a total of ~40 Million in 2025
Saudi Population Growth
(Million) (2004 – 2025)
Historical
Forecast
39.6
2.4%
36.8
37.7
38.6
35.9
33.5
34.3
35.1
32.7
31.2
31.9
30.4
28.4
29.0
29.7
24.2
2004
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025

10. Average Caloric Intake Benchmarks Average Flour Consumption Benchmarks
KSA average daily caloric intake is 14% above the world average resulting in higher flour consumption habits
Average Caloric Intake Benchmarks
(Cal/Capita per Day) (2010)
Average Flour Consumption Benchmarks
(Cal/Capita per Day) (2012)
Yemen
Indonesia
Korea
Sudan
Sudan
Korea
India
Peru
Peru
India
Indonesia
Yemen
World
Germany
Chile
USA
Jordan
+14%
World
Egypt
Canada
+8%
KSA
KSA
Russia
Portugal
Germany
France
Canada
Chile
France
Jordan
Portugal
Russia
USA
Egypt

11. In 2025, flour demand in Saudi Arabia is expected to reach 3
In 2025, flour demand in Saudi Arabia is expected to reach 3.6 MMT which is equivalent to around 4.5 MMT of wheat demand
Flour and Wheat Demand in KSA
Yearly Flour Demand Forecast
(MMT/Year)
( )
Historical
Forecast
3.2%
3.5
3.6
2.9%
3.0
3.1
3.2
3.3
3.4
2.7
2.8
2.9
2.5
2.6
2.3
2.4
2.5
2.0
2005
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Yearly Wheat Demand Forecast
(MMT/Year)
( )
Historical
Forecast
3.2%
4.3
4.5
2.9%
4.0
4.1
4.2
3.7
3.8
3.2
3.3
3.4
3.5
3.6
2.9
3.0
3.1
2.5
2005
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025

12. Daily Wheat Supply / Demand Forecast
(Mt/day) (2013 – 2025)
Accordingly, GSFMO has adopted milling capacity upgrades and expansion plans to continuously address KSA’s wheat demand
GSFMO Capacity Upgrades and Expansion Plans
Flour Mills Plans
(2013 – 2025)
(MT/day)
16,050
3,420
12,630
Wheat (MT/Day)
Current Capacity
Future Plans
Total Future CapacityTotal Future Capacity
+15%
+38%
Silo Plans
(2013 – 2025)
(000’ MT)
4,300
+28%
1,530
2,770
Current Capacity
Future Plans
Total Future CapacityTotal Future Capacity
Feed MillsPlans
(2013 – 2025)
(MT/day)
4,400
1,500
2,900
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Current Capacity
Future Plans
Total Future CapacityTotal Future Capacity
Wheat Supply
Wheat Demand

13. GSFMO Background & Overview KSA Wheat & Flour Market Overview GSFMO Privatization Program Next Steps & Implications
[PLACEHOLDER TEXT]

14. In line with the Government strategy, GSFMO is now embarking on a privatization program…
Privatization in KSA
Government’s Strategic Objectives
Sectors Targeted For Privatization 1
Improving the efficiency of the national economy and enhancing its competitive ability to meet the regional and international challenges
Encouraging private sector investment and effective participation in the national economy, and increasing its share of domestic production to achieve growth in the national economy
Expanding the ownership of productive assets by Saudi citizens
Encouraging (national and foreign) local investments
Increasing employment opportunities, optimizing the use of the national work force, and ensuring the continued equitable increase of individual income
Reducing public expenditure and reducing the burden on the government budget by giving the private sector opportunities to finance, operate, and maintain certain services that it is able to provide
Gov. shares in Arabic/ Islamic Investment Companies
Agricultural Services
Airport Services
Industrial Cities Services 2
Government shares in Public Companies
Wheat Mills and Storage facilities
Air Transportation and Related Services
Municipal Services 3
Government Hotels
Desalination
Port Services
Education Services 4 5
Sports Clubs
Water and Sewage Collection
Highways
Telecom Services 6
Health Services
Social Services
Railways
Postal Services

15. GSFMO Scope of Privatization Scope of GSFMO Privatization
…that will cover all milling (both flour and feed) and some storage activities
GSFMO Scope of Privatization
Scope of GSFMO Privatization
Procurement
Transportation
Storage
Milling
Distribution
Value Chain
Current
Players
GSFMO (imports)
Private Farmers
Private agricultural
Development companies
Sudais, Al-Mousallam,
ARASCO, Al-Habbad,
Al-Shorreih
Grain Silos Flour Mills Organization (GSFMO)
Private distributors and wholesalers
Private retailers and bakeries
Privatization
Potential?
Status
Assumed to remain public
Government assumed to continue to perform procurement role
Leverages purchasing power and ensures availability of wheat
GSFMO currently is the sole entity performing storage and milling activities
All milling and some storage activities will be privatized
Rationale

16. Post-privatization, GSFMO will regulate the entire wheat & flour sector and manage the wheat strategic reserve for KSA
ILLUSTRATIVE
GSFMO Current Vs. Future Role
Current State – Pre-privatization
Future State – Post-privatization
GSFMO Current Scope of Work
GSFMO Future Scope of Work
Silo Operations
Flour Mill Operations
Feed Mill Operations
Wheat-sector Regulatory Function
Strategic Reserve – Silo Operations
Flour Mill Operations
Feed Mill Operations
Operational Reserve – Silo Operations
Private Companies’ Scope of Work
Comments
GSFMO is expected to privatize only part of its grain storage silos – the minimal capacity needed to ensure smooth milling operations of the flour mill companies; the remaining storage capacity will be retained by GSFMO (for strategic reserve purposes)
In the future, GSFMO is expected to undertake the role of wheat-sector regulator, entailing:
Setting regulations related to food quality
Inspecting flour mills to ensure compliance with quality regulations
Regulating the competition among the private flour milling operators
Ensuring that the market structure fosters fair competition amongst operators in the sector
New Function

17. GSFMO Background & Overview KSA Wheat & Flour Market Overview GSFMO Privatization Program Next Steps & Implications
[PLACEHOLDER TEXT]

18. Soft Wheat and Employee Development Privatization Program
Moving forward, GSFMO will seek to develop its capabilities and materialize its privatization program
Next Steps I
Soft Wheat and Employee Development
Given that GSFMO is shifting towards higher importations of wheat vis-à-vis domestic wheat, it is developing a better understand of the implications and considerations of importing new types of wheat on its current milling practices, in particular soft wheat
As such, GSFMO is currently considering the appropriate plans and designs to adopt soft wheat imports into its milling operations
Moreover, GSFMO is seeking flour mills and bakeries experts to introduce employee training programs for soft wheat milling and baking techniques in an attempt to grow capabilities related to this new product II
Privatization Program
GSFMO Privatization Program is well underway, and the process of determining the composition of milling bundles for future private operators is being finalized
Moving forward, GSFMO will start to scout local and potentially international private players in order to identify prospective investors for the GSFMO Privatization Program
When it will be ready to privatize, GSFMO will invite potential investors to participate in the bidding for its milling and silo assets associated with the privatization program