Voluntary Report - public distribution

Date: 4/5/2005

GAIN Report Number: SA5006

SA5006

Saudi Arabia

Market Brief

Ban on Canadian Beef Imports is Expected to Increase U.S. Beef Exports

2005

Approved by:

![](media/image1.wmf)Asif J. Chaudhry

U.S. Embassy, Cairo, Egypt

Prepared by:

Hussein Mousa, Ali Abdi

Report Highlights:

On March 7, 2005, the Saudi Ministry of Commerce and Industry (MOCI)
placed a temporary ban on imports of beef and beef products from Canada
because of the discovery of a third case of Bovine Spongiform
Encephalopathy (BSE) or \"Mad Cow\" disease in Canada. The ban on
Canadian beef is expected to increase U.S. beef exports to Saudi Arabia.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Riyadh \[SA2\]

\[SA\]

### Ban on Canadian Beef is Expected to Increase Imports from the United States 

On March 7, 2005, the Saudi Ministry of Commerce and Industry (MOCI)
issued a circular to Saudi traders announcing a temporary ban on imports
of beef and beef products from Canada because of the discovery of a
third case of Bovine Spongiform Encephalopathy (BSE) or \"Mad Cow\"
disease in Canada. Last year, the MOCI banned imports of Canadian live
cattle when a case of BSE was discovered in the Canadian province of
Alberta.

The ban on Canadian beef is expected to significantly increase U.S. beef
exports to Saudi Arabia. Saudi high quality beef importers indicated
that the ban on Canadian beef imports has left the U.S. as the only high
quality beef supplier to the Kingdom. Some importers reported a 10 to 15
percent increase in demand for U.S. beef following the Saudi
government's decision to temporarily ban imports of Canadian beef. One
Saudi firm that used to import one 40-foot container of frozen U.S. beef
monthly before the ban on Canadian beef was imposed is now planning to
bring in two containers every 45 days. Importers say that U.S. beef
exports to Saudi Arabia could increase sharply if the government removes
its restrictions on animal protein based feed supplements and growth
hormones. In 2001, the Saudi Ministry of Commerce issued requirements
for beef and poultry meat imports, which call for an official statement
certifying that the animal slaughtered was not fed animal protein-based
and was not treated with growth hormones.

In 2003 Canadian beef exports to Saudi Arabia totaled U.S. \$1.9
million, accounting for 5 percent of the total Canadian agricultural
products exports to the Kingdom, which were valued at \$34.6 million. In
2003, the United States total beef and beef products exports were valued
at \$11.2 according to **the United Nations Statistical Office**. Based
on the same data, Saudi Arabia's total beef and beef products imports
were valued at \$89 million during the same period.

For the past several years, Saudi Arabia has maintained a strict ban on
imports of beef and beef derivatives from the European Union and other
countries affected by BSE. Until a ban on Irish beef was placed in
December 1999, Saudi Arabia used to import annually about 50 percent of
its total beef requirement from Ireland. On the other hand, the exit of
Irish beef from the Saudi market has propelled Brazil to the first place
among the leading beef suppliers to Saudi Arabia, followed by U.S.,
Australia and Paraguay. The following table shows Saudi Arabian beef and
beef products imports for calendar years 1999 to 2003.

  ------------------ ----------- ----------- ---------- ---------- -----------
  Top Five Suppliers  Values in                                    
                     Thousands                                     
                     of U.S.                                       
                     Dollars                                       

                     1999        2000        2001       2002       2003

  Brazil             \$3,955     \$4,204     \$24,457   \$69,366   \$58,476

  United States      3,367       4,524       4,162      5,225      11,209

  Australia          3,902       7,250       13,622     10,681     8,571

  Paraguay           0           201         225        259        5,718

  Other              87,854      82,315      13,619     11,756     5,030

  World              \$99,078    \$98,494    \$56,085   \$97,287   \$89,004
  ------------------ ----------- ----------- ---------- ---------- -----------

**Source: FAS\' Global Agricultural Trade System using data from the
United Nations Statistical Office.**

Demand:

The annual demand for beef and veal in Saudi Arabia is estimated at
about 100,000 metric tons (MT), with about 50 percent imported. Local
beef and veal production comes from culled dairy cows, male calves and
imported bulls. In CY 2003, the Kingdom imported 46,209 MT of beef and
veal, with Brazil dominating the market. Brazilian beef popularity in
the past five years was achieved due to its high price competitiveness
compared to other beef suppliers to the Saudi market. For example, a
kilo of Brazilian T-bone steak is sold for \$8.79 in local upscale
supermarkets compared to \$29.07 for T-bone steak from the United
States.

Recent Retail Prices of American and Brazilian Chilled Beef at an
Upscale Supermarkets Chain in Riyadh (all prices are in U.S. dollars per
kilogram).

  ----------- ------------- --------- ----------- ----------- -------------
  Country     Strip loin    Rib eye   T-Bone      Prime Ribs  Tenderloin
                                      Steak                   

  U.S.        29.07         29.07     29.07       26.40       40.00

  Brazil      8.79          8.79      \--         \--         18.40
  ----------- ------------- --------- ----------- ----------- -------------

A French hypermarket, Carrefour, often sells in its Riyadh store a kg of
Brazilian veal steaks, beef mince and beef cubes respectively at \$5.84,
\$2.11 and \$2.38.

According to local beef importers, freight rates contribute
significantly to the higher prices of U.S. beef compared to competing
suppliers. Chilled beef from the United States arrives in Saudi Arabia
by air, while chilled beef from Brazil arrives by sea. The huge quantity
imported from Brazil makes it possible to charter vessels that sail
directly from Brazilian ports to Saudi in two weeks. About 20-25 percent
of all U.S. beef imported by Saudi traders is chilled with the balance
frozen. Upscale Saudi supermarkets import chilled U.S. beef for
distribution at their own outlets. Local beef importers bring in U.S.
beef for distribution to upscale restaurants, five stare hotels, fast
foods restaurants, up scale catering companies and palaces. Usually, it
takes about three weeks for U.S. frozen beef to arrive at Saudi ports
due to a couple of stopovers made in Europe by carrying vessels on their
way to the Kingdom. However, vessels that do not stop in Europe or in
other ports can arrive in Saudi Arabia within 15 days.

Consumption:

Sheep and chicken meats continue to be the sources of animal based
protein for most Saudis and expatriates living in the Kingdom. A recent
survey conducted by the Saudi Ministry of Agriculture concluded that
sheep meat accounted for 70 percent of total red meat consumption
followed by beef (20 percent) and camel meat (10 percent). The prices of
lamb meat are comparable to those of Brazilian beef sold in most
hypermarkets in the Kingdom. Since the early 1990s, the demand for beef
and veal has been on the upswing as a result of continued expansions of
modern supermarkets, casual dinning and fast food restaurants in the
Kingdom. The number of supermarkets in Saudi Arabia has tripled over the
past 15 years, currently totaling more than 300 outlets. Several more
hypermarkets and hypermarkets are being built.

Saudi Arabia's population is currently estimated at 22.7 million and
growing at more than 3 percent annually. More than half of Saudis are in
their teens and nearly 70 percent are under the age of 30. However,
there are no means of recreation for both young and older population: no
bars, cinema, decent parks and similar entertainment facilities geared
to both single and family alike. As a result, shopping trips and outside
dining at fast food restaurants are very popular and are major forms of
entertainments for the Kingdom\'s residents. The relatively higher per
capita income estimated at about US \$9,000 per annum allows a large
segment of the population the luxury of going out for weekend dinners.
This factor has contributed to the huge expansion in the U.S. fast food
chains offering hamburgers and other beef menus. Currently, major U.S.
fast food chains such as McDonalds, Burger King, Wendy's, Hardess, and
causal dinning outlets such as Steak House, Fuddruckers, TGI Friday's,
Applebee's and Chilies as well as leading local outlet Herfy and Kudo
are expanding significantly to cover major Saudi cites, creating more
opportunities for U.S. beef exports to Saudi Arabia.

According to major beef importers, the overall demand for imported beef
is expected to grow significantly in the next few years as Saudis become
more accustomed to buying beef in supermarkets and frequent the growing
number of fast food restaurants.

Quality Regulations:

The Saudi Arabian Standards Organization (SASO) establishes standards
for meat and meat products. Veterinarians from the Ministry of
Agriculture supervise and enforce quality standards at local
slaughterhouses. Local municipalities are responsible for enforcing
quality standards and control at retail outlets selling meat.

The shelf life for chilled beef is 21 days; if vacuum-packed, the
expiration period extends to 10 weeks from the date of slaughter. Vacuum
packed beef should arrive at Saudi ports within 40 days from the
slaughtering date. Shelf life for frozen imported beef is set at 12
months by SASO. Frozen beef should arrive at Saudi ports within four
months from the production date.

For additional information about the Saudi beef import market, U.S.
exporters can contact the USDA Agricultural Trade Office, U.S. Embassy,
Riyadh, Saudi Arabia.

Tel: 966-1-488-3800 ext. 4351

Fax: 966-1-482-4364

Email: AgRiyadh@usda.gov