SAUDI ARABIA – The Saudi Arabian government has complemented the full privatization of barley imports and distribution business in line with its November 2020 decree.
The decision was implemented when the Saudi Grains Organization (SAGO) sold 1.84 million metric tons (MMT) of barley through an open and competitive bidding process to local grain traders.
The quantity was made up of 1.42 MMT of barley stored at 22 packing terminals (mostly contract packers) and seven vessel loads of barley sailing to Saudi seaports carrying 60,000 MT each for a total of 420,000 MT.
The move officially ended a longstanding government monopsony in barley trade that the Saudi government put in place several decades ago.
Going forward, licensed private sector barley importers will purchase barley and sell at profitable prices.
A second stint at privatization
This is the second time that the Saudi government has handed back barley trade to the private sector.
For several decades up to the end of 1998, the government through the Grain Silos and Flour Mills Organization was the exclusive importer and distributor of feed barley in the Kingdom.
At the end of 1998, the Saudi government handed the responsibility of importing and distributing subsidized feed barley to the private sector, an arrangement that lasted until the first half of 2011.
In the second half of that year, the Saudi Ministry of Finance (MOF) took over the importation and management of feed barley from the private sector following repeated complaints by livestock farmers about price gouging and market manipulation by importers.
SAGO assumes regulation role
Following its exit from the import business, SAGO will now assume the new responsibility of licensing importers and ensuring they purchase barley that meets SAGO’s already established quality standards.
SAGO will also monitor the market to prevent price gouging and market manipulation, though analyst believe that the agency may need to purchase additional quantities over the short term.
In preparation for the handover of the barley imports and distribution business to the private sector, SAGO issued imports and distribution licenses to 11 local potential barley traders of which two have already commenced barley imports.
The UFC purchased 1 MMT of barley late last year for a March 2021 arrival while ARASCO, the other licensed company, purchased 100,000 MT of barley that also arrived in March 2021.
ARASCO uses barley and corn interchangeably in its livestock feed production based on price competitiveness.
Saudi barley imports to approximately 6.7 MMT for MY20/21
It is estimated that UFC has at least 700,000 MT of imported barley in its packing facilities bringing the total barley available for April to approximately 2.5 MMT, including the 1.84 million sold by SAGO to the six local companies.
Post estimates another 600,000 MT of barley will be imported by June 2021, either by SAGO issuing
another tender and then selling barley to the private sector or directly by the private sector.
This will bring the total Saudi barley imports to approximately 6.7 MMT for MY20/21.
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