JEDDAH – Saudi Arabia's wheat output for 2012/13 is forecast to fall again in line with the Kingdom's strategy to phase out grains production in the next decade. BMI said in “Saudi Arabia Agribusiness Report Q1 2013” report that Saudi Arabia will find sufficient grain supply from the Black Sea region and the EU to supply its food processing industry in the coming years. Saudi Arabia's grain industry is undergoing a major shake-up. The Kingdom switched in 2008 from a strategy of self-sufficiency in wheat to the gradual elimination of all water-intensive crops, including wheat, by 2016. Wheat production has fallen on average by 12.0 percent annually since 2007/08, and the production deficit has increased by 30.3 percent. BMI forecast output to decrease by 10.4 percent to 1.0 million tons in 2012/13. As a result, wheat imports have picked up since 2008, and are expected to reach 2.3 million tons in 2012/13, up 80.4 percent from the level seen in 2008/09. The report also forecast that imports would increase further, as the government just announced its intention to import soft wheat in addition to the hard variety it currently imports, and to increase the use of feed wheat. The report forecast that wheat production would fall by 48.5 percent to 574,200 tons in 2016/17, noting that “wheat production will continue to decrease in the coming years on the back of the government's program to phase out production.” Moreover, the report also noted that recent spikes in feed prices raised concerns on margins for dairy and livestock producers in the Kingdom, especially the ones that import inputs from abroad. It added that a wave of new investments in poultry production capacity is likely to support strong growth in the coming years and reduce the Kingdom's production deficit. However, milk production will grow 27.2 percent to 2.4mn tons to 2016/17. Milk production will accelerate on the back of high milk prices and rising demand. Poultry consumption will grow 13.9 percent to 1.6 million tons with the growth linked to high population growth and rising personal incomes. Real GDP growth in 2013 is seen at 4.6 percent year-on-year (y-o-y), down from 5.2 percent in 2012 and is projected to average 3.3 percent from 2012 to 2017. Consumer price inflation in 2013 is expected at 5.0 percent average, down from 5.0 percent 2012. BMI universe agribusiness market value is projected at 1.9 percent y-o-y increase to $2.2 billion in 2012/13, and is seen to increase by 3.9 percent on average per year between 2011/12 and 2016/17. On Friday, in the international front, wheat traded near a six-month low, set for the worst weekly run in more than a year, as investors assessed whether an increase in acreage in the US, the largest shipper, will offset yield losses from a drought. The contract for March delivery traded at $7.4525 a bushel on the Chicago Board of Trade at 1:31 p.m. Singapore time. Futures, which slumped to $7.3975 on Jan. 4, are down 0.2 percent this week for a sixth straight decline, the worst run since October 2011. – SG
