February 23 – What Does Saudi Arabia’s Big Barley Imports Imply?

Saudi Arabia just bought another 960,000 mt of barley, paying 12% more than last month’s tender.

While this is positive, is there something else going on?

Saudi Arabia just bought 960,000 mt of barley, revealing the current state of barley in global markets and shocking other nations.

The country paid $243.47 USDA / tonne for this weekend’s tender, which 12.3% higher than last month’s Saudi Arabia barley tender. Competition over the shipment to the Middle Eastern country will come from Germany, France, Australia and the Black Sea. 

Converting those bushels in tonnes at GrainUnitConverter.com, this would equate to $5.30 USD and $6.75 CAD / bushel. 

Saudi Arabia continues their strong demand for barley, using it to feed their goats, sheep, and camels, but it is easily substitutable.

While processed feed – i.e. soymeal – is becoming more expensive, thanks to drought conditions in Argentina, which is the #1 exporter of the feedstuff, it’s still becoming an attractive, and cost-effective option. 

What’s becoming more clear is that the global demand for feedstuffs is strong, which is supporting some higher prices, as evidenced by Saudi Arabia’s recent purchase price of this 1 million tonnes of barley. 

This $235 million USD purchase may support prices further as it does account for a large portion of global trade. But let’s dig in a bit. 

Although in the 2000s Saudi Arabia attempted to grow its barley domestically, it is instead relying on the global market, keeping prices high and stocks tight.

So far this year, this is what the barley purchases by Saudi Arabia looks like, broken down by arrival period and tonnage:

• July – Aug 2017 – 1.5 million tonnes;
• Sept – Oct 2017 – 900,000 tonnes;
• October 2017 – 660,000 tonnes;
• Nov – Dec 2017 – 540,000 tonnes;
• Feb – Mar 2018 – 1.002 million tonnes; and
• Apr – May 2018 – 960,000 tonnes.

The average price paid has increased by about $70 USD / tonnes from the first barley purchase in July to the most recent one discussed above. That’s $1.50 USD or nearly $2 CAD / bushel more in a matter of about 8 months.

The most recent USDA attache report from Riyadh says that Saudi Arabia will import 8 million tonnes of barley in the 2017/18 crop year. This is 6% lower than the 8.5 million tonnes that is the official USDA forecast.

Moving in to 2018/19 crop year, Saudi Arabian barley imports are expected to drop by another 6% to 7.5 milli0n tonnes.

Thus, barley imports, while technically strong at 8 million tonnes this year and 7.5 million tonnes, this is actually trending down.

In 2015/16, Saudi Arabia imported 11.2 million tonnes of barley.

In 2016/17, Saudi Arabia imported 9.5 million tonnes .   

The reduction in for both this current crop year and next year is mainly due to efficiency in managing storage and distribution of barely. Further, the USDA’s attache there in Saudi Arabia says that more processed feed will be used in 2018/19.

While China is getting a lot of attention for importing more barley this year, one could argue that it’s taking the spotlight of Saudi Arabia.

The question that I’m asking though is if prices are going up, but the import forecasts are dropping, this means that prices are too high and are not sustainable.

On that note, we’ve seen feed barley prices come up again in Western Canada this past week and we’ll be looking to dig in deeper with some of the major buyers on the FarmLead Marketplace as we think about initiating our next feed barley sale.  

Tighter global barley stocks force Saudi Arabia to pay 12% more

Saudi Arabia bought 960,000 mt of feed barley over the weekend at tender, paying 12.3% more than it did at its previous tender a month ago as tightening global supply pushes prices higher still, market sources said Monday.

SAGO, Saudi Arabia’s state-owned grain procurement agency, paid an average price of $243.47/mt CFR for 16 vessels of 60,000 mt for delivery between April and May.

Delivered prices ranged from $230/mt CIF Jeddah from an unnamed LLC trading house to $251.84/mt CIF Dammam from Glencore.

SAGO barley buying now stands at 6.3 million mt since the start of the 2017/18 marketing year, with typical annual imports coming to more than 8 million mt according to IGC data.

Saudi Arabia, which traditionally buys feed barley rather than competing feedstocks, uses the cereal as a feed for its goat, camel and sheep populations.

Saudi Arabia previously ran a costly irrigation programme to grow its own cereal crops but abandoned the scheme in the late 2000s and instead turned to the global market.

H/T: Agricensus
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.