Saudi Arabia's plan to phase out production of water intensive crops including animal fodder has opened the doors for multi-million dollar deals with firms in the United States and Canada, traders said on Monday.
Saudi-based Al-Khumasia Company, plans to launch its $40 million crushing and packaging feed mill in July, said Meshaal Al-Wetaid, its assistant general manager said on the sidelines of an industry event in Dubai.
"We will need to import 500,000 tonnes of animal feed and we are looking at getting this from Europe, U.S. and Canada since we can no longer grow the fodder in Saudi because of water shortages," he said, adding that his firm is willing to spend up to $200 million to secure fodder supplies this year.
Saudi Arabia, a desert kingdom with scarce water resources, has stepped up conservation in agriculture.
"It's much cheaper for Saudi to import all water-intensive crops rather than growing them locally," Wetaid said.
Green Prairie, a Canada-based wholesale supplier of fodder is looking to finalize a 150,000 tonnes fodder deal with Saudi Arabia's Al Kholi Group over the coming few days, said Peter Ball, vice president of marketing at Green Prairie.
"The demand for fodder is growing at a very fast pace in the Gulf and this is where most of our big contacts are," he said. The fodder is used to feed the huge and growing dairy herds of the Gulf including camels, horses, sheep and goats.
Shipment takes between 30 and 45 days to arrive by container ship from the U.S. West Coast but remains usable as animal feed for about a year, traders said, adding that the cost of shipping is in the range of $250-$320 per tonne.
The United Arab Emirates is also importing large amounts of animal feed, and last year Abu Dhabi launched a tender for 800,000 tonnes of fodder, traders said.
"We expect that a second tender will be launched with an even larger amount in June," said Gregory Braun, president of U.S.-based Border Valley Trading.
Abu Dhabi is the biggest single customer with 26 distribution centers where the emirate's small livestock farmers receive heavily subsidized supplies, he added.
"Fodder from the U.S. is currently cheaper and of better quality and Saudi Arabia, Qatar, Bahrain and Kuwait are all looking at placing orders," said Marwan Barakat, general manager of UAE's Middle East Group of Companies.
However this could change over the coming years as Gulf investors look to acquiring stakes in farmland in developing nations, he said.
"The UAE and other Gulf countries are investing in agricultural land in countries such as Egypt, Sudan, Pakistan, Kazakhstan and Azerbaijan to grow fodder and they will begin to challenge the U.S. companies," Barakat said.