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The Emerging Food Domino Effect

Almarai-head-office

Touch the Soil News #276

Emerging in the global food landscape is what could well be called the domino effect. In past decades, the effect of one nation’s struggle for food did not necessarily domino over to other nations. Most nations tried to be somewhat food self-sufficient. Many nations had subsidy programs to support and encourage their national foods and farmers. However, no nation ever considered balancing its population with its ability to feed itself.

Then came the World Trade Organization (WTO). To join the WTO, nations had to eliminate subsidies in order for farmers across the oceans to be able to compete with farmers of someone’s homeland.

The world’s policies have essentially come to this – Avoid actions that might balance population with resources and allow national food securities to disintegrate. To top it all off, the world has no plan to keep any level of food stocks. The world has set the stage for the perfect food storm.

Recently the Gulf Digital News brought a classic “domino effect” story to the headlines:

Almarai (of Saudi Arabia) Buys Land in California for $31.8 million.

Almarai refer trucks awaiting shipping orders for dairy products supported by hay over 8,000 miles away on expensive farmland

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Almarai is the largest dairy company in the Gulf Area and the largest vertically integrated dairy company in the world. Integrated means going from feed – through the cow – into milk and other dairy products.

Years ago, the Kingdom of Saudi Arabia undertook a big push to produce hay, grains and other staples to underpin the Kingdom’s food security. The greening of Saudi Arabia, however, led to a collapse in the Kingdom’s fresh water resources. A few years back, Saudi Arabia – facing extreme water shortage – phased in a plan to eliminate growing crops by 2019. With billions of dollars invested, the Almarai dairy was faced with having to go globetrotting to find hay.

The first stop in 2011 was Argentina – 8,000 miles away. The company purchased three farms there totaling 30,000 acres for $83 million – or roughly $2,750 per acre.

The second stop was Arizona, USA. Almarai purchased control of 9,800 acres in Arizona of which only 4,430 is irrigated for $47.5 million or roughly $10,700 per irrigated acre. In Arizona, without irrigation water, no hay of any consequence can be raised.

The third stop came just a couple of months ago when Almarai bought 1,790 acres of farmland in California for a whopping $31.8 million – almost $18,000 per acre. Average hay ground in America ranges from $4,000 to $6,000 per acre – and some of it for less.

The domino effect is unmistakable – as food insecure nations go globetrotting to control farmland and farming, their competition for farming assets is pushing up the price for everyone. Over just 5 years, the cost of farmland for Almarai has increased over 6 fold.

Following is a video clip of one of Almarai’s largest dairy facilities – 22,000 milking cows.

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