Miller Magazine Issue: 128 August 2020

34 NEWS MILLER / August 2020 On July 8, 2020, Saudi Arabia privatized two of its four flour milling companies for 740.5 million USD. The milling companies were reportedly sold through a competitive bidding pro- cess to two consortiums of Saudi and the United Arab Emirates (UAE) investors. Saudi Arabia partly privatizes its flour mills Saudi Arabia has traditionally imported and milled whe- at, and then sold the resulting flour at subsidized prices. But it has been moving toward privatization for a number of years. As part of this process, the Saudi government approved the establishment of four milling companies on November 9, 2015. They were split off from the Grain Si- los and Flour Mills Organization. It had been the exclusive wheat importer and miller in Saudi Arabia. Responsibility for wheat importation and storage was taken over by Sa- udi Grains Organization (SAGO). The four milling com- panies produce and distribute flour from the subsidized wheat. While there is interest in ending the wheat subsidy and supporting low income Saudis directly, it is not known when or if that will occur. If it does, there may be more opportunity for high quality wheat and product differen- tiation. Until a royal decree changing the wheat subsidy policy is issued, the privatized flour mills will continue to receive wheat from SAGO, and mill and distribute it at subsidized rates. Most of the revenue of the private mills is expected to come from milling fees. The privatized mills are allowed to import wheat for non-subsidized flour. Flour prices to bakers and industrial clients have not changed for approximately the past four decades. But the wholesale price of consumer-packed flour increased by 50 percent from $0.27/kg to $0.40/kg in 2017. Large bakeries and industrial users purchase wheat flour directly from the four flourmills, while smaller bakeries and retai- lers receive their assigned quotas from SAGO-appointed distributors. SAGO’s wholesale prices vary based on the flour type and extraction rate. Bakers purchase at prices from $5.30 to $8 per 45 kg based on flour extraction ra- tes, and flour type. Industrial users purchase in bulk for prices that range between $117.30 and $160 per MT. In