Saudi dairy and poultry producer Almarai accelerates feed import policy

By Jane Byrne

- Last updated on GMT

Saudi dairy and poultry producer Almarai accelerates feed import policy

Related tags Saudi arabia

Saudi dairy group, Almarai, has initiated a plan to ensure that 100% of its animal feed stock will eventually be imported from abroad in a bid to make it more sustainable.

The sourcing of its total feed requirements will be incremental, said the dairy and poultry producer, with the feed inputs coming from either its controlled facilities in the US or Argentina or purchased abroad from third parties.

Last month saw Almarai purchase 9,834 acres of farm land in Vicksburg, Arizona, in the US, through its fully owned subsidiary, Fondomonte.

The acquisition, it said, is a way of securing access to a supply of high quality alfalfa hay for its dairy feed requirements. 

The deal – which saw the Saudi dairy producer pay out $47.5 million - includes 3,604 acres of freehold land, ,3080 acres of agriculture lease hold land and 3,150 acres of grazing lease hold land and is also in line with the Saudi government’s strategy of conserving local resources. 

Looming water shortages

Saudi Arabia has a rapidly growing population and an economic growth rate of more than 6 percent per year.

However, less than 2%of its land mass is suitable for food production and looming water shortages are threatening domestic food supplies.

Experts have estimated that it takes between 500 to 1000 liters of fresh water to produce 1 liter of fresh milk in Saudi Arabia due to the irrigation required to grow the Rhodes grass or Alfalfa required to feed the cows.

Growth in dairy herds capped

The Saudi government recently capped the growth in dairy herds – a policy which is said to be intensifying the move by dairy companies there to increase production of recombined milk – milk made from milk powder - to meet consumption demand and avoid further depletion of non-renewable ground water resources.

In the second half of 2012, Almarai switched to recombining for all its long life milk, both plain and flavored. Another leading dairy company in Saudi, Al Safi Danone, followed suit, said Michael Hussey, manager, consumer foods division, at the Irish Food Board, in a note on the Saudi dairy sector.

The fresh milk market is dominated by Almarai with a 46%market share.

Milk consumption in Saudi Arabia reached 729.4 million liters in 2012, with a 6% growth rate every year since 2007. The overall milk market is forecast to grow by 4.9% per annum to 2016, fresh milk by 5.6% and long life by 4.5%, according to data from the Irish Food Board.

Cheese demand alone is expected to increase by more than 60% over the next decade.

Wheat cultivation to be phased out

The contribution of agriculture to Saudi Arabia’s gross domestic product was last measured at 2.49% in 2010, according to the World Bank. It is set to drop even lower once the country’s cultivation of wheat is phased out by 2016.

Fearful of this, and the country’s own food security in doubt, the Saudi government has set out on an outward-looking path of investment in agriculture and food processing.

The initiative has been seen as a massive shift in government agricultural strategy as it moves to phase out a 30-year program to reach self-sufficiency in wheat and other crops to cover its meat, egg and milk production.

The director of the King Abdullah Initiative for Saudi Agricultural Investment Abroad, Saad Khalil, says that Saudi Arabia is looking to invest in 35 countries across the world.

Since the launch of the initiative in 2009, the fund’s work has been conducted in several stages​,” said Khalil at Gulfood earlier this month. “The first phase involved visiting and surveying the targeted countries on a ministerial level accompanied by technical teams that are directly involved with the initiative​.”

The King Abdullah Initiative helps Saudi companies to buy large areas of land in countries that have the available natural resources.

As Saudi private sector companies have traditionally been cautious about investing in agriculture, the initiative hopes to encourage them to invest by offering interest-free loans and strategic partnerships through the state-owned Saudi Agricultural and Livestock Investment Company.

Saudi investors look to Pakistan and Australia

So far, 31 countries have approached Saudi Arabia to host partnerships. 

Saudi food firms have been investing in Sudan, Lebanon, Syria and Egypt, but their respective political situations have forced investors to look for alternatives, with Pakistan and Australia looking to be a good fit.

Pakistan has enjoyed long trading links with the kingdom and the Saudi government and a number of Saudi businesses have already bought up hundreds of thousands of acres of Pakistani farmland.

But such investments have brought criticism from groups like the Asian Human Rights Commission, which is concerned about the south Asian country’s own pressing food security issues.

Related topics Markets

Related news

Show more