Transcript Slide 0

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)
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
1
GSFMO is a national institution that aims to supply wheat and
flour to the entire population of the Kingdom of Saudi Arabia
Objectives
GSFMO Overview
(I)
Grain
Silos
and
Flour
Mills
Organization (GSFMO) is considered
one of the leading national institutions that
has a prominent role in the achievement of
economic development in the Kingdom
of Saudi Arabia, and in the provision of
citizens’ needs of most important food
materials.
• To form an integral industry of grain storage,
flour production and processing of animal
feed
• To establish any other relevant food industries
(II)
• To market its products
(III)
GSFMO was established by the Royal
Decree issued on February 1972, which
was prepared by the government to
provide all means of development and
progress to the Saudi people
(IV)
((V))
• To purchase grains and create a convenient
reserve
stock
to
face
emergency
circumstances
• To meet the goals of the approved agricultural
policy
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GSFMO fulfills its mandate through managing the full wheat and
flour operating sector chains
GSFMO Roles and Responsibilities
Operating Sector Chains
Distribution
and Sales
Grain Silos & Flour Mills
Organization& Private Sector
Milling
Grain Silos & Flour Mills
Organization
Storage
Grain Silos & Flour Mills
Organization
Transportation
Grain Silos & Flour Mills
Organization
Procurement
Grain Silos & Flour Mills
Organization
Private Sector Farmers
Entities Involved
Production
GSFMO Involved
GSFMO (Roles & Responsibilities)
 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.
3
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
GSFMO Presence across Saudi Arabia
Northern
Province
Jawf
Tabuk
Flour Mills Capacities
(MT/day) (2013)
Tabuk
600
Madina
600
Hail
600
Dammam
Hail
Qassim
Jawf
600
Riyadh
Madina
Qassim
Kharj
Dammam
Jeddah
Wadi El
Dawaser
Khamis
Mushait
Khamis
Mushait
Riyadh
Najran
900
1,350
Total
Flour Mill
Silo
Khamis
Mushait
40
Madina
60
Dammam
80
Tabuk
100
Jawf
100
Jeddah
120
Kharj
Hail
2,550
2,580
300
11,430
485
Wadi El
Dawaser
500
Total
Riyadh
300
Jeddah
300
Dammam
300
Qassim
Qassim
Riyadh
Feed Mills Capacities
(MT/day) (2013)
200
1,650
Jazan
Jeddah
Silos Capacities
(000’ MT) (2013)
600
Khamis
Mushait
1,400
Total
2,900
535
2,520
Feed Mill
4
New plants and expansions
GSFMO Flour Mills, Silos and Feed Mills New Expected Capacities
New plants and Expansion
Flour Mills
(MT/day)
Silos
(000’ MT)
AL ahsa
Jeddah
Duba Port
Madina
Hail
AL ahsa
Tabuk
Dammam
Eastren
Region
Jazan
60
150
Northern
Province
Jawf
Feed Mills
(MT/day)
600
600
Khamis
Mushait
80
Jazan
120
Dheba
120
Yanbu
120
Eastren
Region
120
Jeddah
140
Dammam
140
Kharj
300
Madina
300
Tabuk
300
Jawf
300
Hail
300
Madina
Kharj
Yanbu Port
Jumoum
Kharj
600
Al ahsa
600
Jeddah
Khamis
Mushait
Jazan
Jumoum
1,200
Jumoum
Total
Flour Mill
Silo
Feed Mill
3,750
Total
250
1,150
Total
1,500
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GSFMO offers a wide range of Flour products, Feed products and
other Wheat Derivatives to its clients
GSFMO Products
Flour Products

I
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

III
GSFMO
Products
II
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
6
GSFMO is gradually shifting towards 100% imports of
international wheat by 2016
GSFMO Wheat Supply
Local Wheat Vs. Imported Wheat Supply
(MMT) (2008 – 2016)
Historical
Comments
Planned

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
3.40
2.90
2.70
2.40
1.95
1.92
1.72
1.28
0.94
2.02
1.97
1.10
0.78
0.80
0.60
0.30
0.40
0.00
2008
2009
2010
2011
2012
Local Wheat
Local Wheat
(%)
Imported
Wheat (%)
2013
2014
2015
2016
Imported Wheat
85%
33%
40%
36%
28%
25%
18%
12%
0%
15%
67%
60%
64%
72%
75%
82%
88%
100%
7
GSFMO ensures its wheat supply from several countries and is currently
looking to expand its imports base to include Hard & Soft wheat
GSFMO Sources of Wheat
GSFMO Imported Wheat – By Country
(Percentage) (2008-2013 till July)
Import of Hard & Soft Wheat
 GSFMO imports hard wheat & it has
opened up new channels for soft wheat
exporters.
USA
Brazil
Argentina
52%
Australia
20%
Canada
European
Union
 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
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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
9
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)
Historical
Forecast
2.4%
29.0
30.4
28.4
29.7
31.2
2011
2012
2013
2014
2015
31.9
32.7
33.5
34.3
2016
2017
2018
2019
35.1
35.9
36.8
2020
2021
2022
37.7
38.6
2023
2024
39.6
24.2
2004
2025
10
KSA average daily caloric intake is 14% above the world average
resulting in higher flour consumption habits
Average Caloric Intake Benchmarks
Average Flour Consumption Benchmarks
(Cal/Capita per Day)
(Cal/Capita per Day)
Yemen
Indonesia
Korea
Sudan
Sudan
Korea
India
Peru
Peru
India
Indonesia
Yemen
World
Germany
Chile
USA
Jordan
World
Egypt
Canada
KSA
+14%
KSA
Russia
Portugal
Germany
France
Canada
Chile
France
Jordan
Portugal
Russia
USA
+35.6%
Saudi Arabia is Higher than world average by 14%
-2.7%
+8%
Egypt
Saudi Arabia is Higher than world average by 8%
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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
Flour and Wheat Demand in KSA
Historical
Forecast
3.2%
Yearly Flour Demand
Forecast
(MMT/Year)
(2012 - 2025)
2.0
2005
3.4
3.5
2.6
2.7
3.0
2.5
2.5
2.9
2.4
2.8
2.3
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
4.1
4.2
4.3
4.5
4.0
2021
2022
2023
2024
2025
Historical
Forecast
3.2%
Yearly Wheat
Demand Forecast
(MMT/Year)
(2012 - 2025)
3.3
3.6
3.2
3.1
2.5
2005
2.9
3.3
3.7
3.2
3.6
3.1
3.5
3.0
3.4
3.8
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
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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
13
In line with the Government strategy, GSFMO is now embarking
on a privatization program…
Privatization in KSA
Government’s Strategic Objectives
1 Improving the efficiency of the national economy and
enhancing its competitive ability to meet the regional and
international challenges
2 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
3 Expanding the ownership of productive assets by Saudi
citizens
4 Encouraging (national and foreign) local investments
5 Increasing employment opportunities, optimizing the use
of the national work force, and ensuring the continued
equitable increase of individual income
6 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
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GSFMO Scope of Privatization
Scope of GSFMO Privatization
Value Chain
Current
Players
Procurement
GSFMO (imports)
Private Farmers
Private agricultural
Development companies
Transportation
Sudais, Al-Mousallam,
ARASCO, Al-Habbad,
Al-Shorreih …
Storage
Milling
Sales
Grain Silos Flour Mills Organization (GSFMO)
Privatization
Potential?
Status
Rationale
 Assumed to
remain public
 Government
assumed to
continue to perform
procurement role
 GSFMO currently is the sole entity
performing storage and milling activities
 All milling, sales and some storage
activities will be privatized
 Leverages
purchasing power
and ensures
availability of wheat
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Post-privatization, GSFMO will regulate the entire wheat & flour
sector and manage the wheat strategic reserve for KSA
ILLUSTRATIVE
GSFMO Current Vs. Future Role
Current State – Pre-privatization
Future State – Post-privatization
GSFMO Current Scope of Work
GSFMO Future Scope of Work
Wheat-sector Regulatory Function
Silo
Operations
Flour Mill
Operations
Strategic
Reserve – Silo
Operations
Feed Mill
Operations
Flour Mill
Operations
Feed Mill
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
16
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
17
Facts and Opportunities for cooperation Between Saudi Arabia&
USA in agriculture and food sector
Facts
(I)
(II)
(III)
• USA is one of the leading suppliers of Hard &
Soft Wheat in the world and it has been the most
stable source for wheat over the years; so the
stability of the global market of wheat is being
served both by the USA and Kingdom of Saudi
Arabia as a common goal.
• Over the period (2008-2013) GSFMO imported
about one million tons of US wheat which
represented 12% of total wheat imports.
• There are co-operation and coordination
between GSFMO and USWheat association
where GSFMO hosted its Wheat Crop Quality
Trade Seminar for the third year in a succession
and we prepare for fourth Seminar . Also
GSFMO’s representatives participated and spoke
in all USWheat association regional seminars.
Opportunities
we are looking forward to receive competitive
prices from US origin in the coming tenders
especially in views of an improved outlook for
“new crop” 2013/2014.
USA Institution & Companies are invited to
introduce training programs for international
wheat exchanges and flour mills techniques.
We welcome USA Companies
collaborate
with
GSFMO
Privatization of flour mills plants.
to
in
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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
19
Conclusion
USA Companies and institutions are welcomed to collaborate with GSFMO in
I
III
III
II
Participation in
Hard &Soft
Wheat tenders
Privatization
Program
Employee
development
20
Thank You
www.gsfmo.gov.sa
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