Saudi Arabia’s largest dairy company Almarai Co. said it is buying Argentine farm operator Fondomonte for $83 million in a bid to secure access to animal feed.
The acquisition will give the Riyadh-based company control of roughly 12,140 ha of farmland in the South American nation. Almarai said the deal is in line with the desert kingdom’s policy of “securing supplies and conserving local resources.”
Despite its scorching desert climate, Saudi Arabia for decades produced millions of tons of home grown wheat with the help of generous farm subsidies. It is now trying to wind down domestic production because of concerns over dwindling water supplies.
Fondomonte operates three farms dedicated to producing corn and soybeans, according to Almarai. The Argentine company’s website says it also grows barley, rice and sorghum.
Almarai said it plans to use the crops to feed chickens and cattle.
Almarai is one of the Middle East’s largest food companies. It traditionally focused on milk and other dairy products like yoghurt and cheese, but it has recently begun expanding into new product lines such as juices, baked goods and poultry products.
As their populations boom, oil-rich Gulf Arab nations have shown increased interest in recent years in buying up farmland and other agricultural assets overseas to ensure reliable food supplies.
Emirati investors have bought farmland in Pakistan, while Saudi Arabia’s Binladin Group has sought to develop rice fields in Indonesia. Qatar’s sovereign wealth fund set up a company in 2008 known as Hassad Food specifically to target agricultural investments abroad.
That expansion means “it’s even more critical for them to have secure supplies coming in,” equity analyst Farouk Miah commented.