Saudi Arabia: Reduced Wheat Protein for Black Sea Bidders
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SAGO is the exclusive importer of subsidized food grade Wheat in Saudi Arabia. The organization mainly imports hard Wheat directly through public tenders that are open to registered international exporters. It does not buy through Grain brokers. SAGO purchases Wheat from a wide range of origins, including Australia, the EU, parts of South America, the United States, and various Black Sea countries.
Saudi Arabia banned Canadian Grain imports four nearly four years following diplomatic tensions, which started with a tweet from Canada’s previous Global Affairs Minister calling for the release of a human right activist in Saudi Arabia. The tweet not only resulted into a diplomatic brawl, but also the suspension of trade and investment ties between the two countries. Trade volume between Canada and Saudi Arabia exceeded US $3 billion in 2017. According to AgFlow data, Saudi Arabia imported 0.76 million tons of Wheat in Q1 2023. The leading suppliers were Russia (408,000 tons), Ukraine (190,000 tons), Romania (100,000 tons), and Brazil (67,400 tons).
SAGO issues two types of Wheat import tenders. 1. International Wheat Market: Historically, SAGO issued import tenders to all international Wheat suppliers to meet demand, but it set a minimum protein level of 12.5%. This practice lasted until MY 2019/2020. 2. Exclusive Wheat Import Tender for Saudi Companies Farming in Foreign Countries: As the title indicates, this tender is only for Saudi Arabian companies operating farms in foreign countries.
Exclusive Wheat Tenders in Saudi Arabia
There have been two exclusive tenders in this category: a. First Exclusive Tender: In April 2020 (MY2019/2020) SAGO issued a Wheat import tender exclusively to Saudi investors farming in Ukraine and purchased 60,000 MT in September and November 2020. This was the start of an exclusive Wheat imports tenders issued to Saudi agricultural companies that invested in foreign agricultural sectors. Two Wheat shipments came from Ukraine produced by farms owned by the Saudi Agricultural and Livestock Investment Company (SALIC). When the first exclusive Wheat import tender was issued, SAGO called on Saudi investors abroad to supply 10% of Saudi Arabia’s Wheat needs estimated at 350,000 MT.
To qualify Wheat imports from Ukraine and other Black Sea countries, SAGO reduced its protein content from 12.5 to 11%. (All other Wheat import tenders are issued at a minimum protein level of 12.5%.) The Ukraine/Russia conflict, if it continues for a longer period, is expected to eliminate Ukrainian Wheat imports from the Saudi market, which would negatively affect Saudi investor’s operations in Ukraine. However, SAGO will be able to weather the impact by sourcing all its Wheat needs from traditional Wheat suppliers, mostly from Australia and various EU countries.
b. Second Exclusive Tender: In February 2021 (MY 2020/2021), SAGO issued its second exclusive Wheat import tender to supply 10% of the country’s annual Wheat demand, or 355,000 MT of Wheat with a 12.5% protein level. SALIC won the tender and reportedly sourced the Wheat from its subsidiaries and joint venture farming projects in three countries: Australia, Canada, and Ukraine. Recently, SAGO included Canada in its Wheat purchase tenders removing a nearly four-year ban. Commencing from 2022, SAGO asks Saudi companies to supply 20% of the country’s annual Wheat consumption or 700,000 MT.
SALIC plays an important role in meeting the country’s Wheat demand. SALIC is the agricultural arm of the Public Investment Fund (PIF) owned by the Kingdom’s sovereign wealth fund. It was formed in 2011 to secure food supplies through mass production and investments in foreign countries that have comparative advantages in targeted agricultural crops and products including: Wheat, rice, beef, yellow corn, soybeans, forage, poultry meat, etc. The company also has the mandate to import food products when shortages occur in the Kingdom.
Other sources: USDA
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