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Riyadh / Reuters
US agricultural trader Bunge is looking to bid for the Saudi state grain company’s milling operations, sources said, the second global commodities company to show interest in the privatisation of the kingdom’s sole wheat and barley buyer.
A memorandum of understanding was signed by Bunge and
Arabian Agricultural Services Company (ARASCO), a privately-owned Saudi firm, sources with direct knowledge of the matter told Reuters on Monday.
Bunge declined to comment. Sources had told Reuters in March that a partnership of US agribusiness giant Archer Daniels Midland Co and Saudi foods group Almarai were also interested in bidding for SAGO’s milling operations.
No details of the likely price of the milling operations have emerged and it is hard to put a precise figure on it as SAGO had never been run for profit. Saudi Arabia is selling off parts of several state bodies to generate revenue to help deal with lower oil prices and diversify its economy under its “Vision 2030†reform plan.
SAGO, one of the world’s largest wheat and barley buyers, is expected to be among the first to sell assets, making it a model for how others might proceed. The state grain agency is preparing to sell off its milling operations by placing them in four specially formed corporate entities, while retaining other functions.
Saudi Arabia has become a major importer of wheat and barley since abandoning plans for self-sufficiency in 2008, as farming in the desert drained scarce water supplies. The agency currently imports the kingdom’s entire wheat supply of around 3.5 million metric tonnes a year. It has said that demand for wheat is expected to grow at an annual rate of 3.2 percent to reach 4.5 million tonnes a year by 2025, largely due to population growth.