Saudi Arabia will increasingly be dependent on grains imports, as the country has decided to phase out domestic grains 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 production capacity. This strategy has paid off, as the three major producers in the sector have all started heavy investment initiatives. We believe Saudi Arabia will find sufficient grains 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 grains 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.
Key Forecasts
■ Wheat production growth to 2019/20: -92.9% to 30,000 tonnes. Wheat production will be almost completely phased out in the coming years and Saudi Arabia will become entirely dependent on imports for its grain needs.
■ Beef consumption growth to 2020: 15.7% to 233,000 tonnes. Beef consumption will not grow as fast as poultry in the coming years, as beef meat remains more expensive than chicken. However, the expansion in GDP per capita and population will support a moderate increase in beef demand.
■ Poultry production growth to 2020: 35.7% to 950,000 tonnes. This spectacular growth will mainly come from the effects of three major poultry farms' (al-Watania, al-Fakieh and Almarai) capacity expansion, along with continuous government support.
■ universe agribusiness market value: USD14.4bn in 2016, up 2.2% compared with the expected 2015 level; forecast to increase by 6.0% on average per year between 2016 and 2020.
■ 2016 real GDP growth: 1.5% y-o-y, down from 3.4% expected in 2015, projected to average 2.3% from 2016 to 2020.
■ 2016 consumer price inflation: 3.5% average, up from 2.2% expected in...