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BMI View: We maintain our long-held view in our Q3 2016 report update that Saudi Arabia will
increasingly be dependent on grains imports, as the country has decided to phase out domestic
grains production in a desperate bid to preserve the country's water supply. The government has not
abandoned its strategy of self-sufficiency in poultry and has been ramping up incentives to expand
production capacity. This strategy has paid off, as the three major producers in the sector have all started
heavy investment initiatives. We believe Saudi Arabia will find sufficient grains supply from the Black Sea
region and the EU to supply its meat and food processing industry in the coming years. However, the
country will remain highly vulnerable to volatile grains and feed prices. Recent spikes in feed prices have
turned us more cautious on margins for dairy and livestock producers in the country, especially those that
import inputs from abroad. The national dairy sector is set to witness strong growth as the market remains
a heavy consumer of dairy products. Dairy production will also grow as foreign investors use Saudi Arabia,
the world's fifth largest dairy importer, as a regional hub for manufacturing and distribution of halal dairy
butters and cheeses.
? Wheat production growth to 2019/20: -100% to 0 tonnes. Wheat production will be almost completely
phased out in the coming years and Saudi Arabia will become entirely dependent on imports for its grain
? Beef consumption growth to 2020: 3.52% average y-o-y to 227,000 tonnes. Beef consumption will not
grow as fast as poultry in the coming years, as beef meat remains more expensive than chicken. However,
the expansion in GDP per capita and population will support a moderate increase in beef demand.
? Poultry consumption growth to 2020: 3.86% average y-o-y to 1.87mn tonnes. This growth will be
driven by poultry as the most preferred form of meat in tandem with rising prosperity and a growing
? Poultry production growth to 2020: 6.3% average y-o-y to 950,000 tonnes. This spectacular growth
will mainly come from the effects of three major poultry farms' (al-Watania, al-Fakieh and Almarai)
capacity expansion, along with continuous government support.
? BMI universe agribusiness market value: USD14.4bn in 2016, up 2.2% compared with the expected
2015 level; forecast to increase by 6.0% on average per year between 2016 and 2020.
? 2016 real GDP growth: 1.0% y-o-y, down from 3.4% expected in 2015, projected to average 1.7% from
2016 to 2020.
? 2016 consumer price inflation: 4.0% average, up from 2.2% expected in 2015, projected to average
4.0% from 2016 to 2020.