Overview of Saudi Arabia’s Rice Market

No rice is produced in the Kingdom. Saudi rice imports in calendar year (CY) 2010 are forecasted to increase by 4 percent to about 1.1 MMT. Rice and wheat are basic staple foods in Saudi Arabia and consumption of both is expected to grow significantly in the next few years due to an annual population growth rate of 3 percent and the increasing number of Ummra visitors and pilgrims coming to Mecca. More than five million pilgrims come to Mecca each year to perform Ummra and Hajj rituals. Also, the Saudi government procures rice locally for food donations to nearby countries affected by natural disasters.

1. Rice Imports

With an estimated 55 percent market share in CY 2009, India has continued to dominate the Saudi rice market, followed by Thailand (16), Pakistan (14%), and the U.S. 11 percent. During the past years, India benefited most from the shift in Saudis and expatriates consumers' rice consumption preferences which have shifted from long grain white Basmati rice to long grain parboiled or sella or muzza Basmati rice. Saudis and expatriates rice consumers prefer parboiled rice over the traditional long grain white rice since it is easier to cook. Except for Thailand, all major rice supplying countries rice exports to Saudi Arabia were reduced significantly in 2009. Indian rice exports to Saudi Arabia for the first seven months of CY 2009 declined by 19 percent to 428,958 MT compared to the same period last year. Thai benefited from the Indian decreased exports by increasing its rice exports to Saudi Arabia by the same percentage or 19 percent in the same year (174,184 MT vs. 135,286). Pakistani rice exports for January-June 2009 dropped by 45 percent to 87,549 MT compared to the same period in 2008. Similarly, U.S. rice exports decreased by 13 percent in 2009 compared to 2008. Domestic rice importers anticipate that their purchases of U.S. rice could decrease significantly in CY 2010 if the up to $200 price differences between Thai and U.S. long grain parboiled rice reported in February 2010 continues for the rest of the year. Saudi rice trade acknowledges the superior quality of U.S. rice compared to Thai long grain parboiled rice but realizes that a significant number of local consumers are unable to ascertain the difference between the two varieties. Sources allege that illicit traders often pass off Thai rice or Indian low quality rice as American rice by bagging in bags associated with U.S.-origin product. This practice has been going on for several years and has proven difficult to stop. The local availability of dozens of brands of Basmati and non-Basmati rice mainly from India and to some extent from Pakistan has greatly increased competition for U.S. branded rice products. At present, there are less than ten U.S. brands on the Saudi market.

Below are prices per metric ton for different rice variety imported from major supplying countries as of February 2010
Type of Rice and C&F Price in U.S. Dollar per MT Jeddah Port
Indian Sella Basmati $1350
Indian Sella Pusa $950
Pakistani Parboiled IRRI $630
Thailand Parboiled $680
U.S. Parboiled $800-850

2. Saudi Government Lifts Rice Import Subsidy On November 24, 2009, the Saudi government removed the 266.67 per metric ton rice import subsidy program, which it established in December 2007 to alleviate the financial burden on consumers caused because of the sharply rice prices increase. The government indicated that it removed the rice subsidy scheme as foreign rice exporters took advantage of the import subsidy to keep import prices high. Saudi rice importers have reported that a number of major rice exporters exploited the Saudi government’s rice import subsidy program to keep import prices high despite the significant decline in world rice prices that began in mid 2008 which prevented them to pass savings to domestic consumers.