For decades, only a few features punctuated the vastness of the Saudi desert: oil wells, oases -- and wheat fields.
Despite torrid weather and virtually no rain, the world’s largest oil producer once grew so much of the grain that its exports could feed Kuwait, United Arab Emirates, Qatar, Bahrain, Oman and Yemen. The circular wheat farms, half a mile across with a central sprinkler system, spread across the desert in the 1980s and 1990s, visible in spring to anyone overflying the Arabian peninsula as green spots amid a dun sea of sand.
The shift toward imports, which started eight years ago, is reverberating beyond the kingdom, providing business opportunities for grain traders such as Cargill Inc and Glencore Plc as well as for farmers in countries such as Germany and Canada.
"The Saudis are the largest new wheat buyer to emerge," said Swithun Still, director of grain trader Solaris Commodities SA in Morges, Switzerland.
Ahmed bin Abdulaziz Al-Fares, managing director of the Grain Silos and Flour Mills Organization, the state agency in charge of cereal imports, told an industry conference in Riyadh last month that Saudi Arabia will import 3.5 million metric tons in 2016. That’s a 10-fold increase from about 300,000 tons in 2008, the first year local crops were curtailed. An agency presentation says the kingdom will rely on imports for "100 percent" of its wheat in 2016 for the first time.
By 2025, demand is forecast to rise to 4.5 million tons as population growth drives demand for flour, positioning Saudi Arabia as one of the 10 biggest wheat buyers worldwide.
The shift is propitious as the wheat market weathers the largestglut in nearly 30 years, with bumper harvests filling up silos from Russia to Argentina. Prices for high-quality wheat, which reached an all-time high in Kansas City of more than $13 per bushel in 2008, have fallen to less than $5 this year.
Too low aquifers for irrigation of desert wheat; too low oil prices to balance the Saudi budget. For many Saudi citizens used to the comfortable but rigidly controlled life this must feel like a plague.
The Saudis were behind the slump in oil prices, by increasing production to lower prices deliberately in a desperate attempt to knock out the US shale industry. However, in fairness to the Saudis, they were defeated by the advance of technology. Moreover, they inadvertently encouraged not only oil discovery and drilling technologies, from shale to deep water projects, but also the renewable energy industries by keeping oil prices high for as long as they could.
Today, OPEC is all but finished in terms of controlling oil prices. Shale production has been curbed but could be increased very quickly should prices rise. Meanwhile, solar power continues to become more competitive.
Production cutbacks for crude oil, not least from OPEC, remain necessary to lift Brent Crude by another $10 to $20.Back to top