The vast endowment of oil in the Middle East often tends to overshadow the drastic undersupply of other natural resources here in the region.
Take Saudi Arabia for example. Despite being the world's largest oil producer and exporter, the kingdom is drastically malnourished when it comes to its supply of water...and all things that derive from this increasingly scarce, life-giving commodity.
On Tuesday, the Saudi government's financial and agricultural ministries announced they would begin to phase out the kingdom's wheat production with the intention of relying solely on foreign imports by the year 2016. The reason is simple: water depletion.
Back in the 1970s, the last time oil was cracking records left, right and center, Saudi instituted a massive subsidy program for domestic wheat production. The government lavished farmers with as much as 3,500 riyals ($933.5) for every tone and domestic production actually reached surplus by the 1990s. But the gravy train couldn't last forever.
The deputy chairman of the National Committee of Agriculture, Samir Qabbani, figures preserving what little water the kingdom has left is well worth the cost of importing wheat for the 25 million or so people who live there.
"It is possible to save 1,300-1,500 cubic meters of water for every tone of wheat produced," Qabbani reasoned after the government's announcement on Tuesday.
Even with global prices for soft commodities tipping new records, the move towards "imports only" makes sense for Saudi. Wheat crops don't respond well to irrigation from oil and, thanks to $100 per barrel crude prices, the kingdom has no shortage of cash to purchase its bread-making products from abroad.
Saudi produces around 2.5 million tones of wheat per year, enough to remain totally self-sufficient. But its market is relatively small compared to those of, say, Canada and Australia (which are suffering through production problems of their own) and the withdrawal of its crop is unlikely to make any significant dent in global pricings.
"We are dealing with a world situation where the strain on supplies is predominant and when we have an unexpected increase in imports," says Abdoulreza Abbassian, a Food and Agricultural Organisation grain analyst and secretary of the intergovernmental group on grains. "[It] will provide some support to prices, but it will not be anything exceptional."
Perhaps the abandonment of Saudi's wheat program does not mean much in and of itself, but the overarching trend is difficult to ignore. Water, or the lack of it, will continue to play a pivotal roll in the price and supply of commodities coming to market. The more water-intensive the crop, the more acutely its price will be effected by the intractable depletion of the world's fresh water supplies.
Take Saudi Arabia for example. Despite being the world's largest oil producer and exporter, the kingdom is drastically malnourished when it comes to its supply of water...and all things that derive from this increasingly scarce, life-giving commodity.
On Tuesday, the Saudi government's financial and agricultural ministries announced they would begin to phase out the kingdom's wheat production with the intention of relying solely on foreign imports by the year 2016. The reason is simple: water depletion.
Back in the 1970s, the last time oil was cracking records left, right and center, Saudi instituted a massive subsidy program for domestic wheat production. The government lavished farmers with as much as 3,500 riyals ($933.5) for every tone and domestic production actually reached surplus by the 1990s. But the gravy train couldn't last forever.
The deputy chairman of the National Committee of Agriculture, Samir Qabbani, figures preserving what little water the kingdom has left is well worth the cost of importing wheat for the 25 million or so people who live there.
"It is possible to save 1,300-1,500 cubic meters of water for every tone of wheat produced," Qabbani reasoned after the government's announcement on Tuesday.
Even with global prices for soft commodities tipping new records, the move towards "imports only" makes sense for Saudi. Wheat crops don't respond well to irrigation from oil and, thanks to $100 per barrel crude prices, the kingdom has no shortage of cash to purchase its bread-making products from abroad.
Saudi produces around 2.5 million tones of wheat per year, enough to remain totally self-sufficient. But its market is relatively small compared to those of, say, Canada and Australia (which are suffering through production problems of their own) and the withdrawal of its crop is unlikely to make any significant dent in global pricings.
"We are dealing with a world situation where the strain on supplies is predominant and when we have an unexpected increase in imports," says Abdoulreza Abbassian, a Food and Agricultural Organisation grain analyst and secretary of the intergovernmental group on grains. "[It] will provide some support to prices, but it will not be anything exceptional."
Perhaps the abandonment of Saudi's wheat program does not mean much in and of itself, but the overarching trend is difficult to ignore. Water, or the lack of it, will continue to play a pivotal roll in the price and supply of commodities coming to market. The more water-intensive the crop, the more acutely its price will be effected by the intractable depletion of the world's fresh water supplies.
No comments:
Post a Comment