USSaudiForum - Panel 14 - Waleed Elkhereiji - Opportunities in Agricultural and Food Industries

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The 3rd US-Saudi Business Opportunities Forum was held Sep 16-18, 2013, bringing together officials, business people, educators and specialists highlighting the U.S.-Saudi trade relationship and how U.S. companies can participate in Saudi Arabia's expansion.

Saudi Arabia is undergoing an extraordinary economic boom. Massive public investment, rapid private-sector growth and new sector initiatives are driving an expansion projected to offer more than $1 trillion in trade and investment opportunities over the next decade.

This panel of distinguished experts highlighted the opportunities in the agricultural and food industries.

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  • USSaudiForum - Panel 14 - Waleed Elkhereiji - Opportunities in Agricultural and Food Industries

    1. 1. Grain Silos & Flour Mills Organization (GSFMO) Kingdom of Saudi Arabia Wheat and Flour Market in Saudi Arabia By H.E. Eng. Waleed El Khereiji Director General of Grain Silos & Flour mills Organization Opportunities for the agricultural Sector and Food Industry Moderator (16-18th September 2013)
    2. 2. I GSFMO Background & Overview II KSA Wheat & Flour Market Overview III GSFMO Privatization Program IV Facts and Opportunities for cooperation Between Saudi Arabia& USA in agriculture and food sector V Conclusion 2
    3. 3. 3 GSFMO is a national institution that aims to supply wheat and flour to the entire population of the Kingdom of Saudi Arabia GSFMO Overview Objectives
    4. 4. 4 GSFMO fulfills its mandate through managing the full wheat and flour operating sector chains  Purchase wheat from local farmers according to a set price until 2015 and import the remaining demand from international suppliers for KSA. Also it operates all the flour mills in Saudi Arabia and ensure adequate investments to maintain enough supply to satisfy the growing demand.  Manage all wheat storage operations in KSA, both strategic and operational storage, in order to satisfy the increasing demand  Enforce food quality regulations at the point of purchase in storage silos and import tenders, such as protein content, weight, moisture, falling number, etc.  Implement directives by the Ministry of Health & Saudi Food and Drug Authority regarding food additives, e.g. vitamin D, Folic Acid, etc. GSFMO Roles and Responsibilities GSFMO (Roles & Responsibilities) MillingStorage Operating Sector Chains Transpo- rtation Procurement Distribution and Sales GrainSilos&FlourMills Organization GrainSilos&FlourMills Organization GrainSilos&FlourMills Organization GrainSilos&FlourMills Organization GrainSilos&FlourMills Organization&PrivateSector PrivateSectorFarmers EntitiesInvolved GSFMO Involved Production
    5. 5. 5 GSFMO operates 11 branches with total capacity of ~11430 MT/day of flour milling, ~2.5 MMT for wheat storage and ~2900 MT/day for feed GSFMO Flour Mills, Silos and Feed Mills Capacities Flour Mills Capacities (MT/day) (2013) Silos Capacities (000’ MT) (2013) Feed Mills Capacities (MT/day) (2013) 900 1,650 Madina Khamis Mushait Tabuk 600 600 Hail Riyadh Dammam 2,550 Qassim 600 Jeddah Jawf 1,350 600 2,580 Total 11,430 Qassim 485 Hail 300 Kharj 200 Jeddah 120 Jawf 100 Tabuk 100 Dammam 80 Madina 60 Khamis Mushait 40 Wadi El Dawaser Riyadh 500 535 Total 2,520 Khamis Mushait 1,400 Qassim 600 Dammam 300 Jeddah 300 Riyadh 300 Total 2,900 GSFMO Presence across Saudi Arabia Riyadh Kharj Jeddah Hail Madina Qassim Najran Jazan Northern Province Khamis Mushait Jawf Wadi El Dawaser Tabuk Dammam Flour Mill Silo Feed Mill
    6. 6. 6 New plants and expansions GSFMO Flour Mills, Silos and Feed Mills New Expected Capacities Flour Mills (MT/day) Silos (000’ MT) Feed Mills (MT/day) 600 Madina Al ahsa Kharj 150 600 Jumoum 600 Jeddah Jazan 1,200 600 Total 3,750 140 140 Eastren Region Yanbu 120 Dheba Jazan 120 120 Khamis Mushait 80 AL ahsa 60 250 Total 1,150 Hail 300 Jawf 300 Tabuk 300 Madina 300 Kharj 300 Total 1,500 New plants and Expansion Kharj Jeddah Hail Madina Jazan Northern Province Khamis Mushait Jawf Tabuk Dammam Flour Mill Silo Feed Mill 120 Jeddah Dammam Jumoum Duba Port AL ahsa JumoumYanbu Port Eastren Region
    7. 7. 7 GSFMO offers a wide range of Flour products, Feed products and other Wheat Derivatives to its clients I IIIII Flour Products  GSFMO produces varieties of flour: – Powder flour (75-80% Extraction) – Fine flour (70-74% Extraction) – Ordinary Flour (85% Extraction) – Whole Wheat Flour (95% Extr.) Feed Products  GSFMO produces feed-pound (50 kilograms) of high-quality poultry feed and livestock feed (fattening / double), in addition to other feed products Other Wheat Derivatives  GSFMO produces a number of wheat derivatives including: – Jareesh – Harees – Bran for Human consumption GSFMO Products GSFMO Products
    8. 8. 0.00 0.40 0.60 0.800.78 1.10 1.28 0.94 1.72 3.40 2.90 2.70 2.40 2.021.971.951.92 0.30 2008 2009 2010 2011 2012 2013 2014 2015 2016 8 GSFMO is gradually shifting towards 100% imports of international wheat by 2016 GSFMO Wheat Supply Local Wheat Vs. Imported Wheat Supply (MMT) (2008 – 2016) Local Wheat Imported Wheat Local Wheat (%) 85% 33% 40% 36% 28% 25% 18% 12% 0% Imported Wheat (%) 15% 67% 60% 64% 72% 75% 82% 88% 100% Comments  In 2008, the Saudi government adopted a new policy to gradually reduce domestic wheat growing due to water scarcity  The new policy envisaged replacement of domestic wheat procurement through imports; by 2016 all of the Kingdom’s wheat demand will be met by imports  GSFMO started applying the new policy in 2008 by importing 303 thousand tons of wheat; this quantity was increased six fold in 2009 to reach 1.92 MMT  On the other hand, the local procurement of wheat was decreased from 1.72 million tons in 2008 to 778 thousand tons in 2012 Historical Planned
    9. 9. 9 GSFMO ensures its wheat supply from several countries and is currently looking to expand its imports base to include Hard & Soft wheat GSFMO Imported Wheat – By Country (Percentage) (2008-2013 till July) 52% 20% Canada Australia Argentina USA European Union GSFMO Sources of Wheat Import of Hard & Soft Wheat  GSFMO imports hard wheat & it has opened up new channels for soft wheat exporters.  Saudi Arabia is studying local consumer demand to assess potential needs for soft wheat, which is suited for products such as biscuits, and accordingly, GSFMO will gradually increase imports of soft wheat  Saudi flour mills were traditionally built to process hard wheat, but the newly established flour mills are able to handle both hard and soft wheat Brazil
    10. 10. GSFMO Background & Overview II KSA Wheat & Flour Market Overview GSFMO Privatization Program Facts and Opportunities for cooperation Between Saudi Arabia& USA in agriculture and food sector Conclusion 10
    11. 11. 11 KSA’s population is expected to grow at 2.4% per annum reaching a total of ~40 Million in 2025 Saudi Population Growth (Million) (2004 – 2025) 2024 38.6 2023 37.7 2022 36.8 2021 35.9 2020 35.1 2019 34.3 2018 33.5 2017 32.7 2016 31.9 2015 31.2 2014 30.4 2013 29.7 2012 29.0 2011 28.4 2004 24.2 2.4% 2025 39.6 Historical Forecast
    12. 12. 12 KSA average daily caloric intake is 14% above the world average resulting in higher flour consumption habits Average Caloric Intake Benchmarks (Cal/Capita per Day) Russia KSA Egypt Jordan Chile World Indonesia Peru India Sudan Korea Yemen USA Portugal Canada +14% France Germany Portugal Germany Jordan USA Chile World Egypt +8%KSA Russia India Yemen Peru Korea Sudan Indonesia France Canada Average Flour Consumption Benchmarks (Cal/Capita per Day) Saudi Arabia is Higher than world average by 14% Saudi Arabia is Higher than world average by 8% +35.6% -2.7%
    13. 13. ForecastHistorical 13 In 2025, flour demand in Saudi Arabia is expected to reach 3.6 MMT which is equivalent to around 4.5 MMT of wheat demand 3.6 2024 3.5 2023 3.4 2022 3.3 2021 3.2 2020 3.1 2019 3.0 2018 2.9 2017 2.8 2016 2.7 2015 2.6 2014 2.5 2013 2.5 2012 2.4 2011 2.3 2005 2.0 3.2% 2025 2.9% ForecastHistorical 2021 20242023 4.2 4.5 2022 4.3 2.5 4.14.0 2020 3.8 2019 3.7 2018 3.6 2017 3.5 2016 3.4 2015 3.3 2014 3.2 2013 3.1 2012 3.0 2011 2.9 2005 2.9% 2025 3.2% Yearly Flour Demand Forecast (MMT/Year) (2012 - 2025) Yearly Wheat Demand Forecast (MMT/Year) (2012 - 2025) Flour and Wheat Demand in KSA
    14. 14. GSFMO Background & Overview KSA Wheat & Flour Market Overview III GSFMO Privatization Program Facts and Opportunities for cooperation Between Saudi Arabia& USA in agriculture and food sector Conclusion 14
    15. 15. 15 In line with the Government strategy, GSFMO is now embarking on a privatization program… Privatization in KSA Government’s Strategic Objectives  Improving the efficiency of the national economy and enhancing its competitive ability to meet the regional and international challenges  Encouraging private sector investment and effective participation in the national economy, and increasing its share of domestic production to achieve growth in the national economy  Expanding the ownership of productive assets by Saudi citizens  Encouraging (national and foreign) local investments  Increasing employment opportunities, optimizing the use of the national work force, and ensuring the continued equitable increase of individual income  Reducing public expenditure and reducing the burden on the government budget by giving the private sector opportunities to finance, operate, and maintain certain services that it is able to provide Sectors Targeted For Privatization Gov. shares in Arabic/ Islamic Investment Companies Agricultural Services Airport Services Industrial Cities Services Government shares in Public Companies Wheat Mills and Storage facilities Air Transportation and Related Services Municipal Services Government Hotels Desalination Port Services Education Services Sports Clubs Water and Sewage Collection Highways Telecom Services Health Services Social Services Railways Postal Services 1 2 3 4 5 6
    16. 16. 16 GSFMO Scope of Privatization SalesMillingStorageTransportationProcurementValue Chain Current Players GSFMO (imports) Private Farmers Private agricultural Development companies Grain Silos Flour Mills Organization (GSFMO) Sudais, Al-Mousallam, ARASCO, Al-Habbad, Al-Shorreih …  Assumed to remain public  Government assumed to continue to perform procurement role  Leverages purchasing power and ensures availability of wheat Privatization Potential? Rationale  GSFMO currently is the sole entity performing storage and milling activities  All milling, sales and some storage activities will be privatized Status Scope of GSFMO Privatization
    17. 17. 17 Post-privatization, GSFMO will regulate the entire wheat & flour sector and manage the wheat strategic reserve for KSA ILLUSTRATIVEGSFMO Current Vs. Future Role Current State – Pre-privatization Future State – Post-privatization Silo Operations Flour Mill Operations Feed Mill Operations GSFMO Current Scope of Work GSFMO Future Scope of Work Wheat-sector Regulatory Function Flour Mill Operations Feed Mill Operations Strategic Reserve – Silo Operations Operational Reserve – Silo Operations Private Companies’ Scope of Work Comments  GSFMO is expected to privatize only part of its grain storage silos – the minimal capacity needed to ensure smooth milling operations of the flour mill companies; the remaining storage capacity will be retained by GSFMO (for strategic reserve purposes)  In the future, GSFMO is expected to undertake the role of wheat-sector regulator, entailing: – Setting regulations related to food quality – Inspecting flour mills to ensure compliance with quality regulations – Regulating the competition among the private flour milling operators – Ensuring that the market structure fosters fair competition amongst operators in the sector New Function
    18. 18. GSFMO Background & Overview KSA Wheat & Flour Market Overview GSFMO Privatization Program IV Facts and Opportunities for cooperation Between Saudi Arabia& USA in agriculture and food sector Conclusion 18
    19. 19. Facts and Opportunities for cooperation Between Saudi Arabia& USA in agriculture and food sector Facts Opportunities 19
    20. 20. GSFMO Background & Overview KSA Wheat & Flour Market Overview GSFMO Privatization Program Facts and Opportunities for cooperation Between Saudi Arabia& USA in agriculture and food sector V Conclusion 20
    21. 21. 21 Conclusion USA Companies and institutions are welcomed to collaborate with GSFMO in Participation in Hard &Soft Wheat tenders Privatization Program I II III Employee development III
    22. 22. Thank You www.gsfmo.gov.sa 21

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