Wheat prices in both the United States and Europe retreated
on Friday but held just below two-year highs as markets reacted to the sudden
imposition of a ban on grain exports from drought-hit Russia.
Waleed Elkhereiji, director general of Saudi Arabia’s
state-run Grain Silos and Flour Mills Organization (GSFMO), also said the
Kingdom’s domestic harvest of hard wheat stood at 1.1 million tons this year,
16 percent above the 950,000 tons produced last year.
“A drop in input costs, seeds and agricultural equipment,
has encouraged planting and led to a higher harvest,” Elkhereiji told Reuters
in an interview at GSFMO’s headquarters in Riyadh.
GSFMO has enough hard wheat stocks to cover the Kingdom’s
needs until April, without taking into account its 990,000 tons hard wheat
purchased in June and additional stocks of 90,000 tons of flour, he said.
“We are also taking delivery of the local hard wheat
harvest: We have so far received 900,000 tons and there is an additional
200,000 tons expected to be delivered by end-September. We have a comfortable
level of stocks,” he said.
The authority will still need to import 2 million tons of
hard wheat before the start of the next harvest in the Kingdom. “It’s the same
quantity imported this year.”
Elkhereiji also revealed that GSFMO will start importing
soft wheat for the first time. “Some food industries need it so we are going to
import it. If it is not in our next tender it will be the one after it, in
2011. We have already started adapting our mills to be able to process soft
wheat.”
He declined to elaborate, saying the soft wheat imports have
yet to be determined.
Asked about the potential size of GSFMO’s upcoming hard
wheat tender, Elkhereiji said: “Current level of prices does not encourage
buyers to enter the market with large quantities.”
“The pre-emptive planning we have gives us five months
before issuing the next tender... Prices will decline but they will not return
to the lows we have seen earlier this year,” he said.
The price spike after Russia announced its export ban was
such that GSFMO would have paid an extra $80 million for its latest hard wheat
purchase. “We worked hard and luck was on our side,” said Elkhereiji.
“Russia accounts for 10 percent of the world’s wheat trade and
the drought that has affected it has not spared some other European producers.
Still Canada, the United States, China, India and Pakistan are doing well.
“I don’t foresee a crisis, or a crisis similar to what
happened in 2007 and the prices now are still below their level in 2007.”
He noted Saudi Arabia has not imported Russian wheat since
2008.
Since 2008 the Kingdom has sought to save water by reducing
the amount of wheat they buy from local farmers by 12.5 percent a year,
abandoning a 30-year wheat cultivation plan that had helped the country cover
its domestic needs.
The policy has turned GSFMO into one of the biggest new
buyers in the international grains market. GSFMO will sign on Tuesday
agreements to expand its silos and milling capacity as it readies for an
increase in imports.
It will award the Swiss Buhler AG two contracts worth SR368
million ($98 million) to build a 1,200 tons per day flour mill in Makkah and to
expand by 67 percent mill capacity in Jeddah to 450 tons per day.
Local firm Haif Company will be awarded a 506 million riyals
contract to build grain silos in Makkah with a 250,000 tonnes capacity.
