Insight - New rules for barley imports create fresh opportunities in Saudi Arabia

The Saudi barley market is being liberalised and this will open barley purchasing to more exporters. Instead of a single, state-related purchasing organisation, imports will purchased by 10–15 private sector entities.

Austrade advisors in the capital, Riyadh, say that greater flexibility will create more opportunities for mid-tier and smaller exporters from Australia. This includes the potential for smaller shipping orders.

The market opportunity is large in global terms:

  • Saudi Arabia is currently the world’s third largest importer of barley
  • The country purchased US$542 million-worth of barley in 2019
  • Imports for the period 2014–19 averaged US$911 million.1

Saudi Arabia is also moving to free up its internal market in barley, with prices responding to market forces.

The reform process is ongoing. For the latest updates, Australian barley growers and exporters are encouraged to contact Austrade’s Investment Manager in Riyadh, Mohsen.El-Bahaie@austrade.gov.au

The Saudi Government frees up barley imports

Our experts in the field describe the move as a decentralisation of existing arrangements that will encourage a greater role for the private sector. Two important changes are taking place:

  • The existing central grains purchaser – the Saudi Arabia Grains Organization (SAGO) – will relinquish its role to 10–15 private organisations
  • SAGO will take on a more supervisory role, and monitor barley stocks to ensure there is a strategic reserve.

The changes are part of the Saudi strategy to bring efficiency to the food/feed sector and reduce costs and waste in the supply chain.

Gradual introduction

The first orders from the qualified private sector organisations are expected to take place in the first quarter of 2021. Change will be gradual. In late January, SAGO placed an order for 660,000 tonnes to be delivered in March–April 2021.This may be its final order before the import changes take effect.

Australian companies are well-placed to increase exports. Austrade’s Agribusiness Specialist based in Riyadh reports that two Australian companies were successful in the final SAGO tender in January. They gained an average price of US$277.65/mt CFR.

Increased opportunities for Australian exporters

Australia was a major supplier of barley to Saudi Arabia up until 2014. Since then, high prices from Australian suppliers has limited the amount of Australian barley entering the Saudi market. The new import model should help Australian exporters find more competitive price points for exports.

Shipping issues should also ease. According to SAGO’s General Manager of Grains, shipping prices from Australia are competitive with costs from other markets. Currently, SAGO receives shipments in Panamax vessels with capacity for 60,000 tonnes.

With private companies taking over imports, it is likely that the 10–15 companies that are licensed will consider a variety of shipping options. This includes the potential for shipments in smaller vessels.

The Saudi barley market

Barley in Saudi Arabia is mostly used for feed, but Australian produce has a market advantage. According to SAGO, Australia’s barley is well regarded in Saudi Arabia owing to the quality of the product, the unique colour of the grain, and the efficient handling and shipping logistics from Australia.

Change is not confined to imports. The way that barley is distributed within the kingdom is also being liberalised. In January 2020, Saudi Arabia cancelled all direct feed subsidies and is moving to supplying barley at market prices.

Now, eligible small-scale farmers can apply for financial support depending on their implementation of efficient feeding practices. As a result, SAGO expects the size of the barley market in Saudi Arabia to stabilise at around 4–5mt per annum.

Imports from Australia

Until 2014, Saudi Arabia was a major market for Australian feed barley. However, as Chinese barley import prices increased, Australian traders shifted output away from the Middle East2.

Barley imports to Saudi Arabia
Source: ITC Trade Map, Saudi Arabian imports of barley product code 1003 by value in USD thousands 

Next Steps

Austrade will work with SAGO and industry experts to provide a briefing on the Australian barley sector to existing and potential importers. 

Austrade will continue to assist barley exporters by helping them identify opportunities. Austrade will also provide in-market advocacy.

For further information and assistance, please contact Mohsen El Bahaie at Austrade Riyadh, mohsen.el-bahaie@austrade.gov.au

Additional information about the Saudi barley market is available on the SAGO website.

 


 

1. International Trade Centre database. Accessed January 2021.

2. Source: ABS Data Catalogue 9920.0, Australia exports of Barley to the world, feed and malting barley–average over 5 years (2015 –2019)