As the Kingdom prepares to phase out domestic wheat production, the authorities are planning to double the size of strategic reserves by 2016 in order to ensure the country’s food security. To achieve this, the government is currently investing in a major expansion of domestic grain storage capacity. The authorities have also decided to privatise some of the Kingdom’s storage silos, alongside its state-run flour and animal feed mills, though a portion of capacity will remain in government hands to allow the state to ensure the maintenance and control of adequate strategic reserves.
GSFMO: Grain storage in Saudi Arabia is currently managed by the state-backed Grain Silos and Flour Mills Organisation (GSFMO), as are wheat purchases, flour and animal feed milling, and distribution operations. As of 2013, the organisation had a total silo storage capacity of some 2.77m tonnes (up from 2.52m tonnes in the previous year), spread across 12 different sites in the Kingdom; the largest of these was in the capital, Riyadh, with storage capacity of 535,000 tonnes.
In addition, the organisation also had flour milling capacity of 12,630 tonnes per day (tpd) spread across a total of 10 mills, the largest of which are its Jeddah and Riyadh mills with production capacities of 2580 tpd and 2550 tpd, respectively. It also operated five animal feed mills with a combined output capacity of 2900 tpd (one mill, Khamis Mushait accounted for nearly half of this, or 1400 tpd).
EXPANDING CAPACITY: Given concerns over water use and sustainability, the Saudi authorities have reversed their previous policy of maintaining self-sufficiency in wheat and are now working to reduce local production of the crop, with the intention of becoming fully reliant on imports by 2016. As a result, total wheat imports have been growing substantially in recent years, from 1.92m tonnes in 2008 to 2.54m tonnes in 2013, according to GSFMO figures. Imports are set to rise further in the coming years as domestic production is ended altogether and consumption levels continue to rise.
To maintain the Kingdom’s food security and ensure continuous supply, the authorities are now implementing a plan to raise the size of national wheat reserves from the equivalent of six months’ worth of national consumption to a year’s worth by 2016. To make this possible, the GSFMO plans to boost its 2013 silo storage capacity by an additional 1.15m tonnes, through the construction of new silo complexes and the expansion of existing complexes; in all, the plan will involve the construction or expansion of a total of 12 silo sites.
The largest individual project under the initiative will involve the doubling of silo capacity at Jumoum in the west of the Kingdom, through the addition of 250,000 tonnes of new storage space. Brand new silo sites include a 120,000-tonne-capacity wheat silo complex at the port of Jizan in the south-west; construction of the complex began in December 2012, at an investment cost of $149.3m. As part of these expansion plans the organisation also aims to increase flour mill capacity by 3750 tpd by constructing or expanding six plants, including adding 1200 tpd of milling capacity at Jumoum, and boosting feed mill capacity by 1500 tpd.
PRIVATISATION: In addition to its expansion plans, the GSFMO aims to privatise all flour and feed mills by 2016 and to transform its role from a producer of flour and feed to a regulator of (privatised) mills, as part of which it will undertake activities such as setting food quality regulations, inspecting mills and regulating competition.
However, while it will also privatise some grain storage silos – enough to “ensure smooth milling operations of the flour mill companies”, according to a GSFMO document provided to OBG – the organisation intends to retain sufficient storage capacity in its hands for “strategic reserve purposes”, thereby maintaining its role in ensuring food security.