It isn't easy to grow food in the desert. That's why the kingdom of Saudi Arabia decided to stop pumping water and money into its domestic food supply, and instead look abroad for sources of vegetables, red meat and grains.
The search for grain – and the elevators, terminals and ships that handle it – is behind the country's investment in the Canadian Wheat Board, the former Prairie monopoly privatized by the Canadian government on Wednesday.
Saudi Agricultural and Livestock Investment Co. (SALIC) partnered with U.S. agribusiness giant Bunge Ltd. to form Global Grain Group (G3), which will be the majority owner of Winnipeg-based CWB with an investment valued at $250-million.
SALIC was established by the rulers of the Arab country in 2011 with $800-million (U.S.) and the goal of securing stable food supplies and prices and averting food shortages.
In 2013, SALIC and other Saudi funds bought large swaths of farmland in Europe with the £60-million ($109.3-million) purchase of Continental Farmers Group. The deal, for which the Saudis paid a large premium, gave the Saudis almost 40,000 hectares of owned and leased farmland in Poland and Ukraine that produce sugar beet, wheat and rapeseed.
Britain-based researcher Business Monitor International said Saudi Arabia is a year or two away from ceasing any wheat production.
"Saudi Arabia is not a country that can produce a lot of food. So they are going around the world saying how are we going to be able to feed people in Saudi Arabia," said John Cranfield, a professor at the University of Guelph's department of food, agricultural and resource economics. "So having a fund set up to help with the provision of food from a Saudi perspective makes a lot of sense because they have a little more control over that.
"They're a water-poor nation so that makes it difficult to grow anything. It's a nation where they don't have heaps of fertile land so it makes it difficult to put anything in the ground," Prof. Cranfield said.
Canada, Australia and Brazil are listed by SALIC as "priority destinations" for investing in its nine key foods, which include wheat, barley and other grains, and red meat.
Although Saudi Arabia is close to the grain-producing regions of North Africa, the Black Sea and western Arabia, Canada's stability and lack of political strife make it an ideal place to invest, Prof. Cranfield said, adding CWB's grain-handling facilities make the company attractive for a country looking to move a lot of crops.
Karl Gerrand, head of G3, said it was "very difficult" to say how much of CWB's grain would be headed to Saudi Arabia as a result of the deal.
"SALIC will have to be competitive with the rest of the market in acquiring our grain. We're an independent business, run by Canadians, managed by Canadians. We're going to be operating in a normal commercial environment," he said at a news conference on Wednesday.
SALIC could not be reached on Thursday.
Saudi Arabia's move away from grain and other crop production has come with a new focus on domestic poultry farming aimed at feeding growing tastes for meat. This has also turned Saudi Arabia into one of the world's biggest chicken-feed processors.
In 2011, when the Canadian Wheat Board was the global seller, Canada was Saudi Arabia's main supplier, accounting for 30 per cent of the country's 2.9 million tonnes, according to the U.S. Department of Agriculture. Since then, Lithuania and Poland have become the country's main suppliers, and Canada's share of the market has fallen. In 2014, Canada exported a small amount of wheat and barley to Saudi Arabia, according to Statistics Canada.
CWB has been buying and building grain terminals, and says the new investment will help it expand across the country.