Milling & Baking News - July 19, 2016 - 7

Editorial

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Saudi offers new mix for milling

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lour milling executives in developed nations prices, came about because of huge quantities of
who often face many difficult issues may de- water used to grow wheat. Draining water reserves
rive some relief from contemplating what mill- was wisely decided as a poor trade in a world of
ers in Saudi Arabia are facing this year. It is this year wheat abundance. Privatizing flour milling has been
that the kingdom is halting the purchase of locally- a possibility almost from the time the kingdom begrown wheat, which in effect means that no more gan building mills to replace imports after World
wheat is being produced in a country that not long War II. The mills' owner-manager is the widely
ago was striving to be self-sufficient. To protect do- known government agency, Grain Silos and Flour
mestic wheat availability, the kingdom has commit- Mills Organization (GSFMO). In preparing for this
ted to building sufficient new grain storage capacity change, the new name is General Organization for
to bring the total equal to slightly more than a full Grains (GOC).
year's needs, or around 3.7 million tonnes. If this
As prelude to many of these steps, the Saudi
is not sufficient to create complexities, think of the Council of Ministers, which is chaired by King
kingdom's firm decision to finalize before year's end Salman, moved to restructure milling into four sepathe privatization of the entire government-owned rate companies. The new milling companies will buy
milling industry, comprising
wheat from the government
10 mills with daily capacPrivatizing flour milling
and will be allowed to sell
ity of 13,000 tonnes of wheat
flour at pre-determined prices
has been a possibility almost from
grind. This action means sale
to approved customers prothe time Saudi Arabia began
to a Saudi or non-Saudi opercessing the flour into a range
building mills to replace imports
ator or by undertaking an iniof consumer products. In an
after World War II.
tial public offering or finding
opening to free markets, mills
some other way of ending government ownership of may also import wheat at world prices for sale as
all of the kingdom's mills.
non-subsidized flour to high-end specialty bakers
While each aspect of this undertaking affecting and pasta manufacturers. The new milling compasuch a major food industry has its own reasons, nies will control a limited amount of wheat storage,
there's a single driving force - the collapse of oil. all with the hope of improving milling efficiency and
Saudi Arabia long operated with a heady financial encouraging innovation. It is the GOC that will consurplus from its position as the world's largest oil ex- tinue to look over milling operations with responporter. That has dramatically ended since 2014 in the sibility for overseeing product quality, compliance
collapse of oil prices that once ruled above $100 per with government regulations and competition.
barrel and recently fell to $30 and below. At the same
In an interview with our sister publication World
time as the mills are being shifted from government Grain, Abdulrahman Abdulmohsen Al-Fadhli, minownership, suggestions are sought on how best to ister of agriculture and chairman of GOC, expressed
monetize ownership of the Saudi Arabian Oil Co. enthusiasm for the opportunities he sees in private
(Aramco), the world's major oil exporter. It is like- ownership and operation of Saudi flour mills. Prely that a public sale would make Aramco the most dicting the drawing of international investors, he
valuable company in the world, at a total in the tril- cited new investments and heightened progress for
lions of dollars. These actions, it is hoped, will ease food security. Of course, such issues as profits dethe pain of growing deficits that are forcing cuts in pendent on operating fees agreed to by GOC are
consumer subsidies, delays in infrastructure invest- challenging for new owners. The Saudi combining
ing and tapping of once sacrosanct foreign reserves.
both government and private price setting on wheat
Putting oil aside, the end to wheat crop subsidies, and flour promises a much different milling industry
where farmers enjoyed more than double global from any other country. MBN
MORTON SOSLAND, EDITOR-IN-CHIEF
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