Saudi Arabia’s Farming Boondoggle

Here at Al Safi, they proudly display the certificate that arrived from London: “World’s Largest Dairy Farm.”

But if the folks from the “Guinness Book of Records” had looked beyond Al Safi’s 23,400 air-conditioned Holsteins, they might have given the entire Saudi agriculture program an honored place in some hall of unlikely fame, in a room set aside for “World’s Biggest Boondoggles.”

Once the Saudi government could describe agriculture as “one of the kingdom’s most spectacular achievements.” But the spectacle has long since gotten the better of the achievement.

Through years of subsidies that U.S. officials have labeled “crazy,” Saudi Arabia’s government:

* Spent at least $13 billion on stunningly overpriced crops.

* Cast a desert oil state in the unnatural role of wheat exporter.

* Had to dump mountains of grain into the sandy emptiness to rot.

The government has finally ratcheted down the subsidies and is ending the exports. Still, subsidized wheat remains lucrative for the farmer, Al Safi’s general manager, Mohammed al Shonaify, observed.

“It’s still profitable,” he said. “The main problem is the depletion of water.”

The Saudi agriculture minister agreed.

“We cannot afford to continue to subsidize the growth of wheat,” Abdullah bin Moammar said in an interview in Riyadh, the Saudi capital, 60 miles north of Al Safi. “It’s a burden on the government and on water resources.”

Money can be replenished in Saudi Arabia--from the pockets of oil consumers worldwide. But water usually cannot. And it is because of the looming water shortage that the Saudis have reversed their plunge into big-time agribusiness.

They first took the plunge in the late 1970s. After wielding the “oil weapon” against the West in a 1973 embargo, the Saudis realized that they, in turn, could be targeted by a Western grain embargo. The monarchy decreed it was time to work toward self-sufficiency.

Free land was distributed widely. The government paid half the start-up costs of farms and financed the other half with interest-free loans. Milk cows were flown in at government expense. The latest in expensive irrigation technology--U.S. “pivot” equipment--made the desert bloom.

Over 15 years, Saudi land under cultivation exploded from 375,000 acres to 4 million acres. Distinctive green “pivots” dotted the hinterland, disks of cropland irrigated by water pumped up from hundreds of feet underground and sprinkled from arms sweeping in vast circles from central pivots.

Food imports were cut in half. Self-sufficiency grew in eggs, poultry, fruit and other foods.

But soon all the success was smothered in truckloads of wheat.

The government had begun by buying wheat from farmers at $978 a ton, five times the world price. Turning around and selling it on the free market, it absorbed a huge loss, all to encourage planting of a “strategic” commodity.

The big money attracted big operators, including Saudi princes whose connections got them the best land and equipment. The annual wheat harvest grew from a few thousand tons in the mid-1970s to 4.5 million tons in 1993.

Saudi Arabia was suddenly the world’s sixth-biggest wheat exporter. An overwhelmed government, unable to store it all pending sale, turned away grain after paying for it.

“People would see these huge mounds of wheat in the desert, rotting,” a Western diplomat recalled.

Water reserves, meanwhile, were dropping. The Worldwatch Institute estimates Saudi Arabia depleted 7% of its nonrechargeable aquifers simply in growing wheat for export.

Finally, in 1993, the government acted, limiting its purchases to what was needed domestically--now 1.3 million tons a year. And two years ago, it slashed its support price to $400 a ton (still twice the world level).

And now even the cherished policy of self-sufficiency is open to question.

The agriculture minister said the government has not decided whether to adjust the wheat quota upward with growth in the population, which is now about 17 million.

“That’s still under review--whether to allow it to rise or to import from international markets,” Moammar said.

Perhaps half the old wheat land is now fallow or planted in fruits, vegetables or forage crops for livestock, especially dairy cows.

“There’s still a great potential out there in the dairy business,” said al Shonaify, whose Al Safi Farm, owned by Prince Abdullah al Faisal al Saud, supplies 30% of the Saudi market for fresh dairy products.

Al Safi’s Holsteins are descended from American animals imported in the early 1980s. Under sheds fitted with U.S.-made misting fans, they’re kept in 79-degree surroundings even during 115-degree summers. Nearly 5 million gallons of water--for the misters, for irrigating forage crops, for other farm needs--is pumped up every day from wells as deep as one mile.

“We think our cows have developed into the best possible for this environment,” al Shonaify said.

The U.S.-educated engineer plans to make the biggest even bigger: “We’re shooting for 25,000 cows. We’ve got the infrastructure to handle 30,000.”

That kind of talk gives Moammar, back in Riyadh, a sense of deja vu in the desert.

His Agriculture Ministry has already put 500 new livestock “green feeding” projects on hold because they are big water consumers.

“If we do the green feeding on a large scale, we might end up facing the same situation as when we encouraged all farmers to produce wheat,” he said. “It could get out of control.”