2013-02-27 03:13:04 - Recently published research from Business Monitor International, "Saudi Arabia Agribusiness Report Q2 2013", is now available at Fast Market Research
BMI View: Saudi Arabia will increasingly be dependent on global grain supply, as the country has decided to phase out domestic production in a bid to preserve the country's water supply. The government has not abandoned its strategy of self-sufficiency in poultry and has been ramping up incentives to expand capacity production. This strategy has paid off, as the three major producers have all started heavy investment in the sector. We believe Saudi Arabia will find sufficient grain supply from the Black Sea region and the EU to supply its meat and food processing industry in the coming years. However, the country will remain highly vulnerable to volatile grain and feed prices. Recent spikes in feed prices have turned us
more cautious on margins for dairy and livestock producers in the country, especially those that import inputs from abroad.
Full Report Details at
- www.fastmr.com/prod/541277_saudi_arabia_agribusiness_report_q2_2 ..
* Wheat production growth to 2016/17: -48.5% to 574,200 tonnes. Wheat production will continue to decrease in the coming years on the back of the government's programme to phase out production.
* Corn consumption growth to 2017: 30.5% to 2.7mn tonnes. Corn consumption will mainly be driven by the strong growth of the poultry sector, as corn is a major feed ingredient.
* Poultry production growth to 2016/17: 50.0% to 885,000 tonnes. This spectacular growth will mainly come from expansion of the three major poultry farms (Al-Watania, Al-Fakieh and Almarai), along with continuous government support.
* 2013 real GDP growth: 4.6% year-on-year (y-o-y), down from 5.2% in 2012. Projected to average 3.3% from 2012 to 2017.
* 2013 consumer price inflation: 5.0% average, from 5.0% 2012.
* BMI universe agribusiness market value: 2.1% y-o-y increase to US$2.2bn in 2013, forecast to average 6.5% annual growth between 2012 and 2017.
Key Revisions To Forecasts
* Poultry production forecast out to 2016/17 revised up, to 885,000 tonnes (compared with a previous forecast of 830,000 tonnes). This change reflects the wave of investment in production capacity expansion.
Saudi Arabia's retail poultry prices have soared in recent months, as the country is highly dependent on imported grains for its feed needs. Global grain prices remain elevated following the rally initiated in June 2012 in response to a severe drought in the US and other supply problems from Europe and Latin America.
Feed costs account for about 70% of total poultry production costs. Recent increases in chicken prices were also due to the stagnation of poultry production as a result of a higher than normal mortality rate and outbreaks of disease in many farms in 2011/12. It was reported that the mortality rate in some farms reached 50%. Public discontent over rising food prices increased to the point that some activists called for a boycott of chicken consumption. Saudi Arabia's government decided to ban poultry meat exports in early October 2012 and has encouraged major poultry companies to speed up expansion plans aimed at ramping up poultry production by 2015.
Saudi Arabia's grain industry is undergoing a major shake-up. The country 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% annually since 2007/08, and the production deficit has increased by 30.3%. We forecast wheat output to decrease further in 2012/13, by 10.4% to 1.0mn tonnes. Owing to the declining trend in wheat production, wheat imports have picked up since 2008 and are expected to reach 2.3mn tonnes in 2012/13, up 80.4% from the level seen in 2008/09. We expect imports to continue to increase, 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.
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