Kingdom to halt wheat production by 2016

Updated 14 April 2013
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Kingdom to halt wheat production by 2016

The Kingdom is likely to totally depend on wheat imports starting from 2016, says Waleed El-Khereiji, head of Grains and Silos Flour Management Organization (GSFMO).
Many foreign traders have been scrambling for deals in the Saudi market after the Kingdom decided to scrap its 30-year program to boost local wheat output that had reached self-sufficiency.
Since 2008, the government started reducing wheat purchases from local farmers at an annual rate of 12.5 percent, an official from the agriculture ministry says.
He said the Kingdom halted its wheat production program to save underground water.
GSFMO’s announcement confirms that Saudi Arabia is waiting to receive the first soft wheat consignments from overseas exporters.
The announcement, issued by GSFMO last year, was considering turning to import soft wheat to meet the growing demand from biscuit and other sweet food makers.
“In the past year, Saudi Arabia’s local wheat accounted for SR 770 million, where the GSFMO received 770,000 tons of wheat from local farmers in Saudi Arabia at SR 1 per kilo,” said El-Khereiji.
He said: “2015 will be the last market year for local wheat production. We will be fully dependent on imported wheat from overseas destinations by 2016.”
El-Khereiji said the quantity of wheat to be delivered this year from local farmers is estimated at 800,000 tons.
Saudi Arabia’s production of wheat is expected to decline by 9 percent in 2013 to reach one million tons compared to 2011-2012.
To help the government achieve its plan, Saudi Arabia augments the reduction in domestic wheat output by importing from international markets.
Also, the government is likely to maintain its guaranteed purchase price for domestic wheat producers at $ 266.67 per ton until 2016.
According to the US Department of Foreign Agriculture Services’ reports, domestic wheat farmers receive a net payment of $ 240 per ton after a 5 percent deduction for zakat and another five percent deduction for foreign matters (impurity).
Wheat is one of the most important staple grains in Saudi Arabia where most of it is consumed in the form of pita/flat bread and other types of European bread such as French baguettes, hamburger buns, and toast.
Total Saudi food wheat consumption in the 2012-2013 marketing year is estimated to increase by two percent, to about 2.9 million tons compared to the consumption level in 2010-2011.
The consumption of feed quality wheat as animal feed has been increasing for the past two years and is expected to reach about 700,000 million tons by the end of 2013, which will increase total domestic wheat consumption by 21 percent compared to 2010-2011.
Saudi Arabia’s total import volume in 2012-2013 is forecasted to reach 2.5 million tons, of which 1.8 million tons of the commodity is imported by GSFMO for human consumption.
According to GSFMO, they have been importing wheat with 14 and 12.5 percent protein content at the seller’s option mostly from Europe, Canada, the US and Australia. However, GSFMO has occasionally received some high quality wheat shipments from Brazil, Argentina, Latvia and Lithuania.
GSFMO owns and operates 12 silo complexes in major cities around the country with a total combined storage capacity of 2.5 million tons. GSFMO plans to increase wheat storage capacity to 3.5 million tons by 2016.
In January 2012, GSFMO signed a $ 149.3 million contracts to build a 120,000-ton wheat storage silos and a flour mill with a daily milling capacity of 600 tons at the Jazan Port, where both projects will be operational in 2014.
Currently, GSFMO maintains ending stock that covers at least a six-month domestic consumption level. The GSFMO aims at gradually increasing the country’s wheat reserves to cover one year of domestic consumption by 2016.
Wheat traders called for opening the door for more wheat exporters due to the high cost of water and the hot climatic conditions of Saudi Arabia.
“It is more important than ever to target international wheat exporters. Since the issuing of the decision, Saudi Arabia has been suffering from the declining availability of wheat, thus fueling its prices,” said Mohammed Adnan, a wheat trader.
Hamza Al-Kinani, another wheat trader, said the reduction of wheat production led to some increase in the price of the pizza, sweet, pastry and cake.
“We couldn’t increase the price of the pitas, since its price is determined by the government. Therefore, we are trying to increase the price of other products like pizza, sweet, pastry and cake,” he said.
We are expecting a bigger amount of wheat to come, with the government opening the door for Australian wheat, he said.


Dubai property developer Damac on hunt for land in Saudi Arabia

Hussain Sajwani
Updated 18 March 2019
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Dubai property developer Damac on hunt for land in Saudi Arabia

  • Brexit a “concern” for UK property market says Sajwani
  • Developer mulls investing “up to £500 million” on London project

LONDON: The Dubai-listed developer Damac says it is scouting for additional plots of land in Saudi Arabia, both in established cities and the Kingdom’s emerging giga-projects such as Neom.
Hussain Sajwani, chairman of Damac Properties, also said the company would look to invest up to £500 million ($660 million) on a second development in the UK, and that it is on track to deliver a record 7,000 or more units this year.
Amid a slowing property market in Dubai, Damac’s base, the developer is eying Saudi Arabia as a potential ground for expansion for its high-spec residential projects.
Damac has one development in Jeddah, and a twin-tower project in Riyadh — and Sajwani said it is looking for additional plots in the Kingdom.
“It’s a big market. It is changing, it is opening up, so we see a potential there … We are looking,” he said.
“In the Middle East, Saudi Arabia is the biggest economy … They have some very ambitious projects, like the Neom city and other large projects. We’re watching those and studying them very carefully.”
The $500 billion Neom project, which was announced in 2017, is set to be a huge economic zone with residential, commercial and tourist facilities on the Red Sea coast.
Sajwani said doing business in Saudi Arabia was “a bit more difficult or complicated” that the UAE, but said the country is opening up, citing moves to allow women to drive and reopen cinemas.
He was speaking to Arab News in Damac’s London sales office, opposite the Harrods department store in Knightsbridge. The office, kitted out in plush Versace furnishings, is selling units at Damac’s first development in the UK, the Damac Tower Nine Elms London.
The 50-storey development is in a new urban district south of the River Thames, which is also home to the US Embassy and the famous Battersea Power Station, which is being redeveloped as a residential and commercial property.
Work on Damac's tower is underway and is due to complete in late 2020 or early 2021, Sajwani said.
“We have sold more than 60 percent of the project,” he said. “It’s very mixed, we have (buyers) from the UK, from Asia, the Middle East.”
Damac’s first London project was launched in 2015, the year before the referendum on the UK exiting the EU — the result of which has had a knock-on effect on the London property market.
“Definitely Brexit has cause a lot of concern, people are not clear where the situation will go. Overall, the market has suffered because of Brexit,” Sajwani said.
“It’s going to be difficult for the coming two years at least … unless (the UK decides) to stay in the EU.”
Despite the ongoing uncertainty over Brexit, Sajwani said Damac was looking for additional plots of land in London, both in the “golden triangle” — the pricey areas of Mayfair, Belgravia and Knightsbridge, which are popular with Gulf investors — and new residential districts like Nine Elms.
Sajwani is considering an investment of “up to £500 million” on a new project in the UK capital.
“We are looking aggressively, and spending a lot of time … finding other opportunities,” he said. “Our appetite for London is there.”
Damac is also considering other international property markets for expansion, including parts of Europe and North American cities like Toronto, Boston, New York and Miami, Sajwani said.
The international drive by Damac comes, however, amid a tough property market in the developer’s home market of Dubai.
Damac in February reported that its 2018 profits fell by nearly 60 percent, with its fourth-quarter profit tumbling by 87 percent, according to Reuters calculations.
Sajwani — whose company attracted headlines for its partnership with the Trump Organization for two golf courses in Dubai — does not see any immediate recovery in the emirate’s property market, or Damac’s financial results.
“(With) the market being soft, prices being under pressure, we are part of the market — we are not going to do better than last year,” he said. “This year and next year are going to be difficult years. But it’s a great opportunity for the buyers.”
But the developer said Dubai was “very strong fundamentally,” citing factors like its advanced infrastructure, safety and security, and low taxes.
In 2018, Damac delivered over 4,100 units — a record for the company — and this year, despite the difficult market, it plans to hand over even more.
“We’re expecting north of 7,000,” Sajwani said. “This year will be another record.”