Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Saudi fodder output ban spurs Almarai to buy US land

Twitter Linkedin eCard

Saudi Arabia's Almarai, the world's largest integrated dairy company, made a $31.8m land purchase in California in the face of domestic fodder output curbs which have fuelled a slide in its share price.

A ban by Saudi Arabia on fodder production in is driving companies to secure overseas supplies.

The 1,790 acres of land, acquired through Almarai's Fondomonte California operation, will provide Almarai with alfalfa hay for its dairy business.

California is one of the more popular states for foreign investors in US land, who face curbs on purchases in many areas.

Some 2.5% of privately held California farmland is in foreign ownership, compared with 1.3%, 1.1% and 0.7% respectively for the major corn-growing states of Illinois, Indiana and Iowa, according to US Department of Agriculture data.

Profit warning

Shares in Almarai plummeted on Sunday, as the group issued a profit warning, citing a ban on production og fodder, as well as an increase in energy and water tariffs.

Almarai calculated that cost of increasing its green fodder imports at around 200m riyals, or $53m, in 2016 with the amount rising until 2019 as all domestic purchases were phased out.

In addition Almarai calculated the direct and indirect costs of the increased tariffs would at 300m riyals of costs in 2016.

Almarai shares in Riyadh closed down nearly 9% on Sunday, at 69.92 riyals.

Halt to production

Last month, the Saudi cabinet announced that it would stop the cultivation of all green fodder over the next three years.

The move is part of a wider campaign in Saudia Arabia to reduce local agriculture, in order to protect its water resources.

A drive to achieve self-sufficiency in wheat contributed to a sharp reduction in Saudi's water reserves, which have been depleted by more than four-fifths.

Overseas investment

The government has already pledged to end wheat production from 2016 onward.

This shift away from agriculture is driving interest in overseas purchase.

Last year the Saudi government announced financial assistance to investors buying farmland overseas.



In 2014 Almarai acquired 9,834 acres of farmland in Arizona, for alfalfa production.

The company last year announced a strategy of expansion outside Saudi Arabia, particularly in Africa.

And last month the chief executive of Saudi food group Salic, an arm of the state-owned Public Investment Fund, said the group was looking to buy land in Sudan to grow fodder for its meat business.

Sudan was signalled out as an ideal location, thanks to its dry weather and the availability of water.

Almarai shares in Riyadh were down 0.7% at 69.25 riyals on Monday.


Twitter Linkedin eCard
Related Stories

Evening markets: Soybean futures gain, cotton prices jump on US data

Initial USDA forecasts for crop supply and demand for 2018-19 lift soy and cotton prices, but are not so well received in the cotton market

Will protein prices fight back against fat in dairy markets?

Prices of fats remain elevated against protein values in dairy - at a time when the opposite is true in markets for oilseed products

Morning round-up, Friday February 23

French crop ratings... Russia bans imports of Belarus milk... clampdown on foreign purchases of French farmland...

Evening markets: Argentine moisture slips up soymeal rally. But weather revives wheat

Meal futures dip, a little, for the first time in 12 sessions. But wheat futures gain, as drought spreads in Kansas, and cold reaches Europe
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069