Saudi tries out soft wheat; export opportunities loom

Saudi Arabia has opened new and potentially lucrative export channels for wheat exporters such as France and the United States by including soft wheat for the first time in its tenders earlier this month. Higher-protein hard wheat, which Saudi Arabia uses for its traditional flat bread, will continue to make up the bulk of Saudi purchases of the food staple, but the gradual adoption of soft wheat will attract a wider range of origins, traders said. 

Import-dependent Middle Eastern markets are highly prized for major wheat producers and uncertainty over how much Egypt, the world’s wheat importer, will buy as it wrestles with an economic crisis could make Saudi purchases a bigger priority for exporters. “If Saudi Arabia shows a dedication to stay with the soft wheat in the years ahead it does change the export market mix a little, especially with the absence of Egypt in the market here lately,” Shawn McCambridge, grain analyst with Jefferies Bache Commodities, said. 

Saudi Arabia, which has steadily increased wheat imports since abandoning a self-sufficiency policy in 2008 in order to safeguard its water reserves, made a first-ever tender purchase of soft wheat this month, buying 110,000 tonnes alongside 465,000 tonnes of hard wheat. The Saudi state buyer, the Grains and Silos Flour Management Organisation (GSFMO), announced last year it was considering turning to soft wheat to meet demand for biscuits and other sweet foods. A GSFMO official said this week it would continue buying soft wheat. 

Saudi Arabia will import 1.96 million tonnes of wheat for human consumption in the current 2012/13 marketing year, the US Department of Agriculture’s local bureau estimates, a level it expects to rise to 2.2 million tonnes in 2013/14. Wheat imports should rise further as the country aims to wind down completely its domestic production by 2016. The country is also set to import more wheat and other grains for use in animal feed, as it seeks to become less reliant on barley imports and phase out local forage grain crops. 

A handful of countries including Australia, Canada, Germany and the United States have supplied Saudi Arabia with hard wheat in recent years, and varieties like US Soft Red Winter (SRW) and French soft wheat, heavily sold to other importers such as Egypt and Algeria, could now get a foothold in the Saudi market. 

US SRW would appear best placed in the short term to claim such soft wheat sales given its low prices currently. “It’s encouraging because SRW should be really competitive on price,” a US export trader said. “But Saudi specs on quality might be an obstacle.” Russia and Ukraine, among the world’s cheapest wheat exporters in recent years, could also break into the Saudi market for food wheat, although their erratic supply levels may limit their ambitions, analysts said. French traders and analysts are hoping the Saudi change of policy will let them extend beyond their traditional export zone in North and sub-Saharan Africa. 

Copyright Reuters, 2013

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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