An interesting article in Arab News, explains some facets of Saudi Arabia’s current agricultural policy.
The state-owned Agricultural Development Fund has launched a seven-point initiative that includes the establishment of an agricultural information center, water conservation in irrigation, the outsourcing of wheat and fodder production, marketing infrastructure for vegetables, fruits and fish, cooperative insurance for livestock sector, especially poultry and a cattle breeding company.
Minister of Agriculture Balghunaim complains that expansion of vegetables and poultry production has lagged behind. While self-sufficiency in eggs has been achieved, the ratio for poultry is only 42 percent for vegetables 85 percent. The Syrian civil war has led to supply disruptions from a traditional supplier, but they can be sourced elsewhere, for example from Morocco in the case of tomatoes as the minister explained.
The UK government has not granted permission to Shell to pay outstanding debt it owes to Iran in food and pharmaceuticals.
Shell owes Iran $2.3 billion on earlier oil deals and has an interest to repay this debt to maintain good relations with the OPEC producer.
As financial sanctions prevent payment in cash Shell sorted out possible barter deals with British pharmaceutical company GSK and global grain trader Cargill. Iran is already trading part of its oil in barter deals with Pakistan or against non-convertible Rupees in the the case of India.
Food has been exempted from Iranian sanction regimes, yet Iran switched from the US to Australia as a major supplier at the height of the hostage crisis in 1979 out of fear of US food boycotts as I outline in chapter 4 of Oil for Food.
As a result of droughts Iran has increasingly resorted to food imports in recent years, also from the US of all things. This happened despite efforts at self-sufficiency, particularly in wheat.
While Iran managed to increase wheat production in the 2000s, this happened at the expense of other food items like vegetables and meat that witnessed an import boom.
Self-sufficiency remains elusive and the country continues to e dependent on grain imports, which it regards as a strategic liability in light of the current sanction regime.
In good years, Russia and Ukraine are responsible for about half of global barley exports. Saudi Arabia in turn imports about 40 percent of globally traded barley. An early drive at barely self-sufficiency was given up in 2003 already, before the wheat phase out in 2008.
After a drought this summer Russia and Ukraine fail to provide necessary quantities and Saudi Arabia needs to source supplies in Australia, Argentina and Western Europe, where France is a large supplier.
One reason why barley imports in Saudi Arabia are so high are subsidies.They encourage a sheep fattening industry – economically it makes more sense to import lamb and feed it on subsidized barley than importing grown up sheep.
This industry is mostly located in Jeddah and other coastal cities, not in traditional livestock rearing areas.
Beside this industry barley subsidies are also important to feed the camel and sheep of Bedouin in rural areas and ensure tribal loyalty there.
Hence, interests are vested. Yet Saudi Arabia needs to think whether it is wise to incentivize barley consumption to such an extent and maintain such a high dependence on volatile imports.
As self-sufficiency is not an option for lack of water, some sort of demand reduction might be necessary.
Saudi Arabia is about to set up an association for livestock farmers soon. It will be run as a private NGO in order to facilitate governance of the farming sector.
The Ministry of Agriculture feels that it alone does not have the capacities to reach every single farmer and a new institution is required.
The Saudi Minister of Agriculture Fahd Balghunaim expects meat and chicken prices to remain on elevated levels due to the rise in feedstock costs.
He encouraged Saudi consumers to switch from overpriced local sheep varieties to imported ones from Australia or Somalia and argued that quality differences between them were rather perceived than real.
Self-sufficiency in chicken production stays at 45 percent. A massive expansion program is planned. Like dairy production and unlike wheat which is being phased out until 2016, chicken production is slated for expansion.
Antibiotics are a common phenomenon in chicken production globally but seems to be frowned upon in Saudi Arabia, at least in theory. The Minister said:“I swear by Allah that our chickens are hormone and antibiotics free.”