Oil money stocks up the OPEC food larder

Thursday, February 3, 2011
A scramble by oil-rich nations to spend their mounting petrodollars on food stocks and fend off price rises, which have triggered riots and revolution, could stoke wider inflation.
As concern about contagion from Tunisian and Egyptian protests persists, Gulf Arab countries are moving fast to boost food imports via international markets and seeking more farmland investments abroad.
Oil money stocks up the OPEC food larder

Top oil exporter Saudi Arabia, which has a high unemployment rate among its native population of almost 19 million, said last week it was worried about global food inflation.
Faced with a rising population as the biggest Arab economy attracts more foreign labour the kingdom already said it hoped to double its wheat reserves within three years.
Saudi Arabia's wheat imports will rise beyond the two million tonnes in 2010, said Khalid al-Rwis, a professor at the College of Food and Agricultural Sciences at King Saud University in Riyadh.
"This year it could be 2.6 million tonnes," he said, adding that the kingdom would have to import three million tonnes of wheat by 2015
The Saudi government has also said the kingdom will also need 3.8 million tonnes of barley, 1.25 million tonnes of rice and 0.78 million tonnes of sugar by 2015.
Other members of the Organization of the Petroleum Exporting Countries have also focused on food.
Algeria confirmed in January it had bought almost a million tonnes of wheat and had ordered an urgent speeding up of grain imports.
Libya's most senior energy official Shokri Ghanem has repeatedly cited a broader rise in commodity prices as justification for expensive oil.
"It should be around USD 100 to compensate for the big increase in the food price," Ghanem told Reuters. "Prices of food have risen and it is tantamount to having a big cut in your income."
The latest wave of food inflation has revived memories of the riots of 2007 and 2008 when commodity prices surged and oil hit a record of USD 147.27 in July 2008.
Arid Gulf nations reacted by beginning a strategy of buying farmland in developing nations to improve security of supplies.
"Social instability generated by food inflation was at a head in 2007. We're seeing inklings of that again," said Jan Randolph, head of sovereign risk analysis at IHS Global Insight.
"It's a very important, live wire issue that affects the Gulf countries."
This is especially true for Saudi Arabia where social pressures are rising with the population and its growing economy is attracting more expatriates, while Saudis struggle to find work -- unemployment was 10% last year.
Annual inflation eased to 5.4% in December but shoppers in Saudi Arabia complain about rising food prices, prompting the chamber of commerce in Riyadh to call on the government to build up reserves for nine basic commodities.
"Its very important to start with the strategic reserves and build up storages," said Rwis, the food researcher.
"Owing to their dependence on imports and the large weighting of food prices in the consumer price indexes, higher global food prices will definitely impact on inflation in the Gulf," said Paul Gamble, head of research at Jadwa Investment.