Saudi Arabian agency stops buying Canadian wheat, barley

HAMBURG - 8 August 2018: Saudi Arabia's main state wheat buying agency has told grains exporters it will no longer buy Canadian wheat and barley in its international tenders, European traders said on Tuesday, as a diplomatic dispute between the two countries escalates.

Traders said they had received an official notice from the Saudi Grains Organization (SAGO) about its decision.

Canada on Monday refused to back down in its defence of human rights after Saudi Arabia froze new trade and investment and expelled the Canadian ambassador in retaliation for Ottawa's call to free arrested Saudi civil society activists.

"As of Tuesday August 7, 2018, Saudi Grains Organization (SAGO) can no longer accept milling wheat or feed barley cargoes of Canadian origin to be supplied,” a copy of the notice seen by Reuters said.

One European trader said it was not clear if the decision involved only new purchases or delivery of previously agreed contracts. "But I would not deliver Canadian grains to Saudi Arabia now, even on previous contracts," the trader added.

Another trader said: "This is to me clearly part of the diplomatic dispute between Saudi Arabia and Canada, there is no other reason."

The SAGO agency usually gives sellers the freedom to select the origin of wheat purchased in its international tenders, generally specifying it must be sourced from the European Union, North America, South America or Australia.

In SAGO's last purchase of 625,000 tonnes of wheat in an international tender on July 16, Canada was seen as a possible supplier.

One Middle Eastern grain consultant said the decision was not a great loss to Canada, though.

"Both Canada and the U.S. lost the Middle East market a long time ago ... because they are at a freight disadvantage (with higher ocean shipping costs) to the EU and Black Sea export markets," the consultant said.

"The only class of wheat that Canada still exports to the region is durum but even that is not that much."

"So neither Saudi nor Canada are going to be affected much by stopping the wheat and barley trade."

According to Statistics Canada, the Canadian government's statistics agency, total Canadian wheat sales to Saudi Arabia excluding durum were 66,000 tonnes in 2017 and 68,250 tonnes in 2016.