Saudi Arabia is the largest agricultural, fish and forestry products importer among members of the Gulf Cooperation Council (GCC) countries. The potential for agricultural production is limited in Saudi Arabia due to the lack of arable land and renewable water resource. Hence, imports of food will continue to be strong and will grow proportionally with the population.
In 2008, Saudi Arabia’s total agricultural, fish and forest product imports were valued at approximately $8 billion. High-value products accounted for 50% of total imports, while intermediate agricultural products were estimated at more than $1 billion. U.S. agricultural exports to Saudi Arabia for January-October 2009 decreased 28 percent over a year earlier to about $581 million, with consumer-oriented food products imports declining by five percent to $198 million. According to trade source, most of the decline in the value of the U.S. agricultural exports to Saudi Arabia was caused as a result of decline in the prices of imported products compared to 2008 and 2007.
The vast majority of food products are subject to a 5% import duty. Selected processed food products, however, are assessed higher import duties. In order to protect local food processors and production from competitively priced imports, the Kingdom ties import duties to the level of local production of similar products. As a general rule, a maximum import tariff rate of 40% is applied when local production of a food or agricultural product exceeds a self-sufficiency level. Currently, a 40% import duty rate applies to fresh, dried and processed dates.
In March 2008, the Saudi government exempted wheat, wheat flour and other grains from import duties and reduced duties levied on 75 other foodstuffs to 5% beginning on April 1, 2008. The aim was to alleviate the impact of the rising cost of living in Saudi Arabia. Major foodstuffs that benefit from the reduced 5% import tariff include chilled and frozen poultry and their products, eggs (fresh, dried and powdered), cheese, cheese cream, vegetable oils, pasta, canned meat, fruit and vegetable juices, mineral and ordinary water, long life milk, corn flakes, peas, beans, peanut butter, yeast, and baking powder. The government will review the list in April 2011.
In January 2009, Saudi Arabia issued a revised animal feed subsidy list that consists of 17 energy and protein rich animal feed ingredients. Under the revised program, the government will provide rebates that range from $26 (rice hulls) to $101 (soybean meal) per metric ton, depending on the type of imported feed. The rebate will be paid directly to the local importer. The revised list added two new feed items-Rhodes grass and Sudan grass-to the subsidy list. In November 2009, the Saudi Arabia government removed the $267 per metric ton subsidy on imported rice which it decreed in December 2007. The government removed the import subsidy because of significant reductions in the prices of imported rice due mainly to bumper harvest in several rice producing countries.
For religious reasons, Saudi Arabia bans imports of alcoholic beverages, live swine, pork and food ingredients or additives that contain pork products, including pork fat and gelatin. Meat and poultry shipments must be accompanied by a “Halal” slaughter certificate issued by an Islamic center in the country of origin. Additional statements on the health certificate accompanying poultry and livestock meat shipments must indicate that the animals slaughtered for export to the Kingdom were not fed with feed containing protein, fat or remnants of animal origin and were not treated with any growth hormones. The most important regulatory, non-tariff barriers that U.S. food product exporters encounter in Saudi Arabia include: biotech labeling, production & expiration date regulations, Arabic labeling requirements, a declaration that animals slaughtered and exported to Saudi Arabia were not fed with feed containing protein, fat or remnants of animal origin, and a Halal Slaughtering certificate for both livestock and poultry meat.
Saudi Arabia is the most influential member of the Gulf Cooperation Council (GCC), which includes five other countries in the Arabian Peninsula: United Arab Emirates, Kuwait, Bahrain, Oman, and Qatar. As a group, the GCC is striving to create a common set of food standards. The Saudi Arabian Standards Organization (SASO) is a dominant standard setting agency in the GCC countries. Currently, SASO is the only Saudi organization responsible for setting national standards for commodities and products, measurements, testing methods, meteorological symbols and terminology, commodity definitions, safety measures, and environmental testing. Since its establishment in 1972, SASO has issued more than 800 production and testing standards for food products and is presently working on new standards. Saudi standards are typically based on Codex Alimentarius regulations and to some extent on European and U.S. standards, but are modified to reflect local conditions.
While standards are set by SASO, Saudi Food and Drug Authority (SFDA) tests imported processed and packaged food items at various ports of entry. The standard setting responsibilities will move to the SFDA in the next few months.
Leading U.S. agricultural exports include rice, yellow corn, soybean meal, planting seeds, crude and semi-refined corn oil, hardwood lumber, sweeteners, tree nuts (mainly almonds), snack foods, fresh apples and pears, processed fruit and vegetables, dairy products, red meat, fruit and vegetable juices, fresh fruit, and a wide array of other high-value consumer-oriented products. Saudi Arabia’s positive biotech labeling requirement, production date stamp requirement, Arabic labeling, Halal slaughtering requirement, and additional manufacturer statement for imported livestock and poultry meat remain major concerns for U.S. foodstuff exporters.
Yellow corn is used principally in poultry feed and to a lesser extent in livestock rations. The Saudi government has continued financing the establishment of new poultry farms in various regions of the country. Existing large to medium sized poultry producers have been expanding in recent years, increasing the country’s self-sufficiency levels to about 55% in 2008. Saudi Arabia imports about 2 million metric tons of yellow corn annually and its value is projected to reach $470.million by the end of 2009. Argentine remains the largest yellow corn supplier to Saudi Arabia followed by the U.S. and Brazil.
U.S. feed corn exports to Saudi Arabia for the months of January-October 2009 decreased by 51 percent over the same period in 2008 ($70 million vs. $141 million). The higher U.S. corn prices compared to Latin American prices are the main reason for the decline of U.S. corn export to Saudi Arabia in 2009. The sharp decline in the world feed corn prices, which started at the end of 2008, has helped the Saudi government reduce its feed corn import subsidy from $266.67 per metric ton in March 2008 to $60.26 in January 2009. The rebate is paid directly to importers.
Soybean meal is used principally in poultry feed and to a lesser extent in livestock rations. The continued expansion in local poultry production has increased the demand for soybean meal by more than 5 percent per annum in recent years. In the past few years, a huge price difference between Latin American and U.S. soybean meal has made imports from the United States less competitive and drastically reduced U.S. market share in Saudi Arabia. According to a recent U.S. Customs data, U.S. soybean meal exports to Saudi Arabia declined by 44 percent for January-October 2009 over the same period last year ($44 million vs. $79 million). The increases in the total values of soybean imports in 2007 and 2008 reflect the drastically increased world soybean meal prices which reached $650 per metric ton in early 2008. The prices stared to decline in late 2008 reaching $500 per metric ton at the end of November 2009. The continued decrease in the world soybean meal prices has helped the Saudi government reduce its soybean import subsidy from $396 per metric ton in March 2008 to $101 in January 2009. The rebate is paid directly to importers. Currently, Saudi Arabia imports about 800,000 metric tons of soybean meal per year.
Saudi Arabia imports more than one million metric tons of rice annually. With 60 percent market share, Indian remained the dominant rice supplier to Saudi Arabia, followed by Pakistan, United States and Thailand. In 2008, the value of the United States rice exports to Saudi Arabia reached $117 million, an increase of 47 percent compared to 2007. According to a recent U.S. Customs data, U.S. rice exports to Saudi Arabia increased by 10 percent in January-October 2009 compared to the same period last year ($109 million vs. $99 million). Local rice importers attribute the sharp increase in U.S. exports in recent years to a decrease in exportable rice from India and U.S. price competitiveness compared to other Asian rice exporters. The higher values of total rice imports in 2007 and 2008 reflect the sharp increase in the world prices for rice during that period. In November 2009, the Saudi government removed the $267 per metric ton subsidy on imported rice which it decreed in December 2007. The Saudi government lifted the import subsidy due to reduced world rice prices compared to 2007 and early 2008.
PROCESSED FRUITS AND VEGETABLES
The Saudi market for processed fruits and vegetables is huge. The growth of supermarket and hypermarket food sales is helping to broaden the market for this sector and good market growth is expected to continue in the next few years as supermarkets and hypermarkets open more outlets in major cities of the Kingdom. Local production of canned fruit and vegetables has been increasing in recent years but it depends almost entirely on imported ingredients, some of which are sourced from the United States. The majority of the processed fruit and vegetables that are labeled, “manufactured in Saudi Arabia” are products that are actually re-packed in the Kingdom. The insufficient local fruit and vegetable output and the high costs related to importing them for use in local processing suggest that a significant demand for processed fruits and vegetables will continue to be met by imports. Dates processing and packaging account for about 60% of the total domestic processed fruit production. U.S. processed fruit and vegetables exports to Saudi Arabia decreased by 10 percent in January-October 2009 compared to the same period in 2008 ($33 million vs. $37 million).
The latest official figures indicate that more than 60% of the Saudi population is in their teens, representing a major consumer of snack foods. Local snack food production has drastically increased in the past few years, accounting for about 50% of local consumption in 2007. There is a general decline in the importation of corn and wheat-based snacks. Candies and chocolates are also being locally manufactured on a large scale. Exporters may also look into supplying raw materials for the fast growing snack industry. U.S. snack food exports to Saudi Arabia for the months of January-October 2009 increased by 68 percent over the same period in 2008 ($27 million vs. $15 million). Snack food products that cater to Saudi consumers’ preferences, which tend to favor sweeter items, generally find better market reception.