* Direct contracts for grain, other commodities eyed
* Farmland leasing and purchasing also planned
* Long-term food security, water concerns cited
By Christine Stebbins
CHICAGO, April 29 Saudi Arabian investors are
looking to expand their agricultural investments in the United
States to secure long-term food supply because of water
shortages in the desert kingdom, Saudi officials said on
Investments could range from 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, they said.
"We have a very good relationship with the United States,
not only politically but from the agriculture side. We are
importing many agricultural products from you. The United
States is one of the countries for our initiative," Abdullah
Al-Obaid, deputy minister for research and agriculture
development, told a U.S.-Saudi business forum here.
The United States is one of about two dozen countries that
Saudi private investors, in consultation with the government,
are targeting for agricultural investments.
"The countries that we have to invest in have to have the
abundance in land and water," said Taha Asad Alshareef, a
member of 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 behind Saudi Arabia's drive
In 2008, the Saudis announced they would end a 30-year
drive to grow their own wheat and reduce wheat output 12.5
percent a year due to 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 currently consume about 2.6 million tonnes of
wheat a year. Officials recently said the country will import
1.2 million tonnes of cereal grains this year.
The Saudi agriculture minister said on Wednesday that
investors are looking at opportunities to buy into 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 told
Direct contracting -- where an end-user like a snack maker
or specialty vegetable oil refiner arranges production
one-on-one with the farmer -- is a growing part of U.S.
agriculture due to the premium prices offered.
Japanese tofu makers, for instance, have had contracts with
U.S. growers to produce tons of organic or non-genetically
modified soybeans for several years. Specialty corn hybrids and
wheats, like hard white winter wheat, are other examples.
The Saudis have established a government arm, the Food and
Agriculture Company, as an investment vehicle capitalized at 3
billion Saudi riyals ($800 million).
Private Saudi investors have also formed a joint venture,
International Agriculture and Food Investment Company
(Agroinvest), capitalized at 2 billion riyals.
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. There will also be
investments in the production of poultry, fish and livestock.
(Editing by Steve Orlofsky)