Sector News

Report: Bunge bidding for SAGO's milling operations

May 23, 2017
Food & Drink

Bunge, a U.S. agricultural trader, is attempting to buy Saudi Arabia’s state grain company’s milling operations, Reuters reported on May 22.

Reuters said sources confirmed that a memorandum of understanding was recently signed by Bunge and Arabian Agricultural Services Company (ARASCO), a privately-owned Saudi firm.

Saudi Arabia is selling off parts of several state bodies to generate revenue to help the country 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 and Saudi Arabia’s sole wheat and barley buyer, is expected to be among the first to sell assets, making it a model for how others might proceed, Reuters said.

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, according to Reuters.

After many years of trying to be self-sufficient in wheat and barley production, water-challenged Saudi Arabia abandoned that plan and has become a major importer of those grains in recent years. According to the U.S. Department of Agriculture, in 2016-17 Saudi Arabia is expected to import 3.7 million tonnes of wheat and 11 million tonnes of barley, all of which will be brought in through SAGO. In 2008, the year the government announced it would no longer try to be self-sufficient in grains, Saudi Araba produced 2.5 million tonnes of wheat and imported just 75,000 tonnes.

Bunge, which declined to comment, supplies milled wheat, corn and rice products to food processors, bakeries, brewers, foodservice companies and snack food producers.

It was reported in March that U.S.-based Archer Daniels Midland Co. and Saudi Arabian foods group Almari were also interested in purchasing the Saudi Grains Organization’s (SAGO) milling operations.

By Arvin Donley

Source: World Grain

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