x Abu Dhabi, UAESaturday 29 July 2017

Saudi food adventure needs rethink

Domestic farming is extremely costly, leaving purchase of overseas farmland as one option to providing security for a growing population.

Over the past two years, Gulf investors have been buying vast tracts of farmland abroad: Saudis in the Philippines, Qataris in Cambodia, and Bahrainis in Thailand. A typical example is Papua, an Indonesian territory, where the Saudi Binladin Group hopes to spend about $US4.3 billion (Dh15.79bn) developing local rice fields.

Saudi agriculturalists are in two minds about the push overseas. The steep rise in food prices last year prompted many Gulf states to look abroad for cheaper sources of rice, grain and other staples. But Saudi Arabia should have been the exception. In the 1980s, the kingdom made a concerted effort to become self-sufficient in basic foods, with remarkable success. Between 1980 and 1992, wheat production grew by more than 29 times to 4.1 million tonnes.

"Agriculture policy seems to be blowing with the wind and it is hardly surprising," says the senior executive of a Saudi food technology firm, who asked not to be named. "Buying farmland in places like Sudan looked like a good idea in 2008, but these farms will be at risk in future periods of scarcity when governments can simply ban food exports. You can only really achieve food security within your own borders but Saudi Arabia's water resources are scarce and have been badly managed."

Sudhakar Tomar, the managing director of Hakan Agro, a GCC food commodities trading company based in Dubai, disagrees. "It's a simple case of supply and demand," Mr Tomar says. "If the country doesn't have enough food and the climate is not conducive to grow food, they have to import it." Encouraged by subsidies, Saudi farms proliferated after the first oil boom, at a huge cost to the country's deep groundwater reserves.

Between 1980 and 2000, the kingdom consumed about 300 million cubic metres of water, the agriculture ministry says. That is equal to the entire flow of the Nile over six years. Most of it was used by farms and cannot be replenished. Yet three decades of intensive food production proved one thing: when good-quality water was made available, conditions in parts of Saudi Arabia were ideal for agriculture.

"The average national yield has doubled in the last 30 years," says John Lawton, a British farming consultant based in Riyadh who arrived in Saudi Arabia in the 1970s. "Saudi farms are producing up to 10 tonnes of wheat per hectare, and with double-cropping you can also get up to 14 tonnes of maize in the same year. Europe isn't even getting a third of that yield." Despite being one of the most arid countries in the world, Saudi Arabia became a major food exporter.

Its chickens, eggs and cartons of milk can be found in supermarkets across the Middle East, and it is a net exporter of dairy products, sending processed cheese and dried milk as far afield as South East Asia. Saudi dairy farms are, says Mr Lawton, "among the top 5 per cent in the world, whichever way you judge it". Saudia Dairy and Foodstuffs Company, or Sadafco, sells milk, ice cream and other products through about 20,000 outlets in the Gulf states alone.

Its main Saudi rival, Almarai, has the largest integrated dairy business in the world, with 40,000 cows. Due to climate and scale reasons, UAE dairy firms are at a competitive disadvantage with the Saudis. Despite local firms having a total of 26 farms with 15,000 cows producing 167,000 tonnes of fresh milk a year, the UAE still imports about 40 per cent of its dairy products, mostly from Saudi Arabia.

"The UAE does not have much arable land, so it will have to remain dependent on imports for a long time," says Mr Tomar. But the miracles of modern agriculture have cost Saudi Arabia dearly. As wheat yields have increased over the years, the pressure and level of the deep fossil-water aquifers beneath Saudi Arabia have dropped. Most of the green crop circles across the kingdom are centred on deep bores. Many are now being abandoned.

With industry making more demands on supplies, Saudi authorities are pressed to meet the needs of the rapidly growing population. Water use is growing by as much as 6 per cent a year. Cities such as Jeddah are particularly badly affected. Last year, the authorities had to bring in two floating desalination plants to supply 50,000 cu metres of emergency water to the city. Agriculture accounted for 88 per cent of water demand in 2007, when the Saudi government began to rethink its programme.

Wheat-growing subsidies are now being gradually scaled back. Production has been halved since 2000 to about 2.7 million tonnes. Last year, the Saudi agriculture and finance ministries said they were cutting the amount of grain bought from local farmers. By 2016, they said, the kingdom would be entirely reliant on imports of grain. But the Saudi push to grow the country's food on farmland bought from other countries has not proved as easy as first thought.

Saudi Binladin, for example, has been trying for almost two years to persuade Indonesian smallholders to sell their land. Policy may need to be rethought. Carl Atkin, the head of research at Bidwells's agribusiness division, says there is no single answer to providing food security. "For all GCC countries, buying farmland overseas has a role to play but it's not the only solution to the problem," says Mr Atkin.

"You have to look at the whole portfolio of options available, look at what products you're trying to secure and also think about what exactly will you do with those products once you've got them." @Email:business@thenational.ae