Canada: Agricultural trade to resume to Saudi Arabia

A potential market for Canadian wheat and barley has been repaired with the stroke of a pen.

Canada has restored diplomatic ties with Saudi Arabia and the two countries will soon appoint new ambassadors.

That ends a political spat that started in 2018 and disrupted trade.

The row started when the Canadian embassy published a tweet urging the release of women’s rights activists held in Saudi Arabia.

Punitive trade measures will now be lifted.

Saudi Arabia is the world’s second largest barley importer behind China, buying between 4.2 and 4.4 million tonnes per year.

It used to be the largest buyer, with imports peaking at 11.2 million tonnes in 2015-16.

The country buys feed barley primarily for its sheep, goats and camels. There are no malt barley purchases.

Lately, the government has encouraged the import of cheaper feed substitutes, which is why barley sales have tapered off, said MarketsFarm analyst Bruce Burnett.

Saudi Arabia had been a sporadic buyer of Canadian barley before the diplomatic dispute.

Purchases ranged from nothing to 357,223 tonnes in the decade prior to the dispute. Burnett said the Saudis would turn to Canada in years when Australia, the European Union or the Black Sea had short crops.

Those three regions are its top suppliers for geographic reasons, and until recently for political reasons as well.

He said it will be nice to have the Saudi market re-emerge as an option, especially now that China and Australia have resolved their barley dispute.

That is going to make Australia a fierce competitor in China, which is Canada’s top market by a long shot.

Australia’s production is expected to return to normal this year after three consecutive years of La Nina-fueled bumper crops.

A good portion of the 2023-24 crop could head to China, which means there could be market opportunities for Canada in Saudi Arabia.

There could also be some opportunities for Canadian wheat in that market.

Saudi Arabia used to be a sizable producer and exporter of top quality, high protein wheat.

It was a major competitor to Canada in the 1990s, producing about four million tonnes of the crop and exporting 2.3 to 2.5 million tonnes.

But the Saudi government decided it wasn’t practical to keep watering wheat fields.

“They virtually eliminated all those water subsidies that they had,” said Burnett.

“They’re no longer irrigating wheat in the desert.”

The country is now growing about 600,000 tonnes of the crop and importing 4.5 to five million tonnes annually.

Most of the imports are softer wheats from the European Union, Black Sea and Western Australia. But they may buy Canadian wheat from time-to-time, he said.

The United States Foreign Agricultural Service noted in a recent report that the General Food Security Authority is the exclusive importer of food grade wheat in Saudi Arabia.

But the government is working to hand that responsibility off to the Saudi Agricultural and Livestock Investment Company (SALIC), which is the majority owner of G3 Canada. That transfer will happen in the next few months.

SALIC also has investments in Australia, Brazil and Ukraine.

“It is unclear how SALIC will operate when it becomes the exclusive importer of wheat in Saudi Arabia,” stated the FAS.

However, in 2023-24, the government has issued an exclusive wheat import tender of up to 720,000 tonnes for Saudi companies farming in foreign countries.

“SALIC is expected to supply the quantity using its investments (in) international grain exporting partners such as G3 Global Grain Group, Olam Agri Holdings or GB,” said the FAS.

Tags: wheat, purchases, crop, Market, China, barley, trade, Canada, Saudi Arabia