Saudi Arabia outlines next phase of flour mills privatization

SAUDI ARABIA – Saudi Grains Organization (SAGO), the state grain buyer has stated that it will begin the next phase of the sale of its flour mills within days in a privatization move.

According to Reuters, privatization of the flour mills is part of Saudi Arabia’s government plans to overhaul its economy through diversification.

Pre-qualified bidders are expected to begin the process of performing due diligence and present financial offers.

Some of suitors for the deal include some of the world’s largest agribusiness firms, including Archer Daniels Midland Co and Bunge Ltd.

Based on its Vision 2030, the country is looking to diversify its economy apart from oil, citing a bigger role from the private sector, which contributes about 40% of its GDP.

Reuters notes that interest in SAGO’s mills comes as Saudi Arabia grows increasingly dependent on grain imports.

The kingdom has become a major importer of wheat and barley since abandoning plans in 2008 to become self-sufficient, as farming in the desert was draining scarce water supplies.

The flour mills have a combined daily milling capacity of 12,630 tonnes (wheat equivalent) and process 3.3 million tonnes of wheat annually.

Total Saudi wheat consumption in 2017-18 was about 3.5 million tonnes based on data provided by SAGO, with wheat flour consumption at about 2.8 million tonnes, according to World Grain.com.

SAGO is the exclusive importer of subsidised food-grade wheat in Saudi Arabia.

The organisation imports mainly hard wheat directly through public tenders open to registered international exporters.

Saudi Arabia’s wheat production is expected to skyrocket the next two market years due to the government’s decision to reduce irrigation.

Production is forecast at 500,000 tonnes in 2018-19 and 700,000 tonnes in 2019-20, up from 10,000 tonnes in 2017-18, according to U.S. Department of Agricultures’ Foreign Agricultural Service (FAS) March report.

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