CHICAGO, Ill. (Reuters) – Saudi Arabian investors are looking to expand agricultural investments in the United States to secure long-term food supplies because of water shortages in the desert kingdom.
Investments could include buying crop land, obtaining long-term land leases of 30 years or more, taking equity stakes in major food companies or contracting directly with farmers to grow crops.
“We have a very good relationship with the United States, not only politically but from the agriculture side,” said Abdullah Al-Obaid, Saudi Arabia’s deputy minister for research and agriculture development.
“We are importing many agricultural products from you. The United States is one of the countries for our initiative.”
The U.S. is one of about two dozen countries that Saudi private investors are targeting for agricultural investments in consultation with the government.
“The countries that we have to invest in have to have the abundance in land and water,” said Taha Asad Alshareef, a member of the King Abdullah Initiative for Agro-Investment Abroad.
“We have identified two dozen countries and to date we have visited nine of them.”
The nine are Turkey, Ukraine, Egypt, Sudan, Ethiopia, Kazakhstan, the Philippines, Vietnam and Poland.
Soaring world food prices that peaked in 2008 and dwindling water supplies from aquifers are prompting Saudi Arabia’s drive abroad.
In 2008, the Saudis announced they would end a 30-year push to grow their own wheat and reduce wheat production 12.5 percent a year because of reduced water supplies.
In November 2009, they said they would phase out water intensive crops and import all their wheat needs by 2016.
The Saudis consume 2.6 million tonnes of wheat a year. Officials recently said the country will import 1.2 million tonnes of cereal grains this year.
Saudi investors are looking at opportunities to buy farmland in Algeria and have already started investing in countries to secure food supplies, including Egypt and Sudan.
Contracting directly with U.S. farmers to grow crops on their farms is “the best option for us,” Alshareef said.
Direct contracting, in which an end-user such as a snack maker or specialty vegetable oil refiner arranges production one-on-one with a farmer, is a growing part of U.S. agriculture because of the premium prices offered.
Japanese tofu makers have had contracts with U.S. growers to produce organic or nongenetically modified soybeans for several years.
The main crops targeted by the Saudi investors to be produced in foreign countries are rice, corn, barley, wheat, sugar, corn, soybeans and other oilseeds.