With little fanfare, this week the Kingdom of Saudi Arabia inked an agreement to purchase 660,000 tonnes of wheat from farmers in Canada, the United States, Australia and the European Union.
Sixty five million sacks of flour. One and a half billion loaves of bread. At average Canadian yields, the deal is equivalent to 2,800 square kilometers of farmland – about the size of four Edmontons.
The Canadian Wheat Board refuses to release details on the sale, but if past orders are any indication, much of that 660,000 tonnes will be coming out of the Prairies.
And it is only the beginning. More and more, Canada’s grain exports are being bought up by the arid countries of the Middle East.
“Their requirements are quite substantial, so it’s a welcome sign for a wheat marketer,” says Bruce Burnett, the Canadian Wheat Board’s director of weather and market analysis. “For certain products, North Africa and the Middle East are going to be our prime markets.”
Last year, every second piece of flatbread eaten by a Saudi Arabian was baked with grains grown and harvested on Canadian soil. It “was one of the biggest Canadian sales ever,” Canadian Ambassador David Chatterson told a gathering of Saudi businessmen in November. This year the grain-hungry Middle Eastern country is expected to go through two million tonnes of wheat, most of which will come from either Germany or Canada.
Across the border, Iraq’s bakeries are also stocked primarily with Canadian grain. Last year, the Persian Gulf country bought 1.1 million tonnes, making it the world’s largest non-U.S. buyer of Canadian wheat.
As recently as the 1990s, Canadian wheat growers would be lucky to sell a single truckload of wheat to the two oil-rich countries. Grain exports to Saddam Hussein’s Iraq were severely restricted by UN sanctions. Saudi Arabia, in turn, had sworn off imports in favour of an isolationist plan to grow all their grain in the desert on circular fields irrigated using water pumped from a non-renewable fossil aquifer. For decades, satellite images of the desert country were peppered with matrices of green dots.
Three years ago, citing a need to preserve the country’s drinking water, Saudi authorities announced they were phasing out their desert agriculture program. Ever since, the desert kingdom has found itself in the uneasy position of securing a crucial resource from foreigners. Ironically, Saudi Arabia’s relationship with grain is increasingly mirroring the rest of the world’s relationship with oil, the one resource Saudi Arabia has in abundance.
Since the 1973 oil embargo orchestrated by Saudi Arabia, the United States has kept four Gulf of Mexico salt caverns stocked with 700 million barrels of emergency oil. Similarly, Saudi Arabia – along with Iraq, Jordan, Egypt and the U.A.E. – maintains massive grain silos stashed with “strategic reserves” of grain. And much like China’s efforts to secure buy up oil projects in Alberta and Sudan, Saudi Arabian officials have been buying up massive tracts of agricultural land in East Africa.
The Saudis are still on the lookout for long term sources of supply, but until that happens, says Mr. Burnett, it is accepting proposals from any producer who can deliver. Canada has been “bidding aggressively” for Saudi wheat contracts, say analysts.
Canadian food producers profit on having a “positive reputation” in the Middle East, says Bessma Momani, a political science professor at the
University of Waterloo. “People in the Gulf look for the Made in Canada symbol, it’s a very strong sign of high-quality,” says Ms. Momani.
While Canadian wheat may be a relatively new commodity in the Middle East, it has long been a staple to North African countries such as Algeria, Morocco and Egypt, the world’s largest importer of wheat.
Climate instability can violently shift the Middle Eastern demand for Canadian wheat. In 2008, for instance, Iran shipped in a whopping 1.7 million tonnes of Canadian wheat, almost as much as the European Union’s annual take of Canadian wheat. The next year, the country’s share of Canadian grain had dwindled back to zero. “You get huge fluctuations in those particular areas,” says Mr. Burnett, noting that Iran’s import demands have ranged anywhere from 220,000 to 6.5 million tonnes.
As Middle Eastern populations rise and growing conditions become more unpredictable, Canadian wheat prospects in the area are only expected to increase. The Middle East is home to some of the most water-stressed countries on earth. Serial droughts have hit the region four years in a row, causing a significant spike in food prices. High food costs in Egypt and Tunisia were one of the contributing factors behind the Arab Awakening.
This January, Canadian export hopes were high with word that Iran and Iraq’s wheat crops had been stunted by dry weather, fuelling speculation that import demands could rocket upwards by an extra 10 million tonnes. Those hopes were quashed when the region was hit with a spate of rains in early spring.
With nearly 10,000 kilometers separating Gulf ports from Halifax grain elevators, Canada is vulnerable to losing its Middle Eastern wheat contracts to nearby producers such as Russia and Ukraine. For now, at least, the two Eurasian countries remained on Saudi Arabia’s grain black list because of “low protein content” and other “import specifications.”
National Post
thopper@nationalpost.com
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