INTERVIEW: Saudi Arabia's ARASCO targets poultry self-sufficiency amid rising grain prices

Feed mills as a crucial component of the food supply chain are vulnerable to changes both upstream and downstream. Considering the recent spike of the Platts FOB POC corn assessment to a 16-month high, S&P Global Commodity Insights interviewed Anis Alam, the chief grain procurement officer at Saudi Arabia's ARASCO.

The following Q&A sheds light on how one of the country's largest feed mill companies manages grain price changes and is helping meet Saudi Arabia’s goal of poultry self-sufficiency.

This Q&A has been edited for clarity.

S&P Global: How has the feed industry changed in the last 30 years?

Anis Alam: I started in the feed mill industry in 1986. In those days, ARASCO wanted to have a quality feed mill in the area, because there wasn’t one. We started with one feed mill with a capacity of around 6,000 mt/month and we were in a position where if we sold that amount, we were in a safe position financially. Today, we have four feed mills, each with 1 million mt capacity. Two are close to Riyadh and two are in the port city of Dammam.

S&P Global: What is ARASCO’s total capacity?

We built infrastructure that is capable of handling 4 million-4.5 million mt of raw materials, with an exact capacity of 4.5 million mt of feed. This year, we are going to reach 3.5 million mt of feed plus raw material sales. We have a 500,000 mt storage facility at Dammam port. We have ships that can carry 74,000-75,000 mt of corn from the US or South America, wherever it becomes cheaper.

S&P Global: Do changes in geopolitics impact your ability to secure grain?

Anis Alam: We have faced these situations several times in our life. When war is happening, roads, channels and our ships have been stopped here and there, but we have not had a shortage due to war, not even during the Gulf War. We were 100% operational and made sure [we got what we needed] because we are dealing with live animals. Of course [in these circumstances], we have to pay hefty prices, which we did. We don’t mind doing so long as the business continues. We are serving the country and community, and ultimately the people for the security of the country.

S&P Global: How do you manage raw material price changes?

Anis Alam: We have learned a lot of permutation in our purchasing and securing of raw materials. We go for a long hedge and are directly connected with all the big grain houses. We have strategic relationships with everybody. Also, the government of Saudi Arabia is facilitating everything possible under its control. We are getting [grain] from all places, but logistically today, Argentinian and Brazilian corn are becoming much better price-wise, so wherever we are saving a dollar or cent, we go and grab it.

S&P Global: How much feed do you produce for domestic consumption and for export?

Anis Alam: Feed exports are few, but we are exporting some special feed, like fish feed. The [domestic] market is more than 10 million mt of compound feed. This year, we are going to touch 3 million mt, so there is still room [for growth]. Big dairy farmers are not buying from us as they do their own formulations. We cater for livestock, which we categorize as sheep, goat and camel. At present, we are producing almost 100,000 mt of feed a month for livestock and 70,000-80,000 mt for our poultry.

S&P Global: The Saudia Arabian climate poses a unique challenge. How do you manage this challenge?

Anis Alam: Let me give you an example. For corn, we are discharging 14% moisture at Dammam port, which is a coastal area with good humidity. We have another feed mill 400 km away and another one very close to Riyadh. By the time we receive it there, 14% becomes 13% or even less moisture. As Riyadh and central areas area have an arid climate, we are lucky if we get 10% moisture. These are the losses we have put into consideration from day one. A loss of 14% to 13% is 1%, but the financial loss is almost 7%-8%. We’ve calculated those risks and because of the volumes we are selling, we are comfortable and can make money.

S&P Global: Saudi Arabia wants to attain self-sufficiency in poultry. Has this impacted the trade flows?

Anis Alam: Two years ago, we were almost 30% domestic production, 70% import. Today, it’s the opposite -- we are 75% self-sufficient and 30% imported. By the end of 2025, the plan is to become 100% self-sufficient. We [ARASCO] have doubled almost our poultry production capability and there are some new players. The government is helping in every respect possible in terms of equipment, subsidies etc. to achieve 100% self-sufficiency. People are becoming health conscious and want to buy fresh products. It is costing the country a lot, but the country is very committed to this.

There are plenty of grains available in the market as climatic conditions are good everywhere. Despite the Russia-Ukraine war, everyone is producing. Europe is producing better. India and China are producing their own grain, so there is no shortage at this stage, and we are not concerned about availability. The only concern everybody has is if China starts buying 20 million-30 million mt, prices will jump, but that is not happening because the Chinese economy is not doing as great as expected. We are secured for six months ahead -- this is the way we do [business]. With the experience of 40 years of business, we have learned what not to do, more than what to do.