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Saudi Agricultural Stocks Surge by 16% in Two Days since Reduction of Petrol Prices

Beirut (APD) - The agricultural index on the Saudi Stock Exchange, Tadawul, surged by 15.8% in two days following the Kingdom's decision on April 30 to cut domestic fuel prices by 30%. Production expenses in the agricultural sector are expected to decline by 8%.

"The agricultural sector, among other sectors relying on fuel products, will benefit from the reduction of prices. This will be reflected on the stock prices and operational profits later on this year," Ahmad Sharbaji, financial manager at Gassim Agricultural Company , GACO, told APD Wednesday.

GACO, a 95% public owned agricultural company in Saudi Arabia's Qassim province, was among the top gainers on Tadawul this week, with the share price increasing by 17% to close SR 27.17 on Tuesday, although the shares are still trading 80% lower than at their 2006 peak reached on February 20.

After a crash in the Saudi stock market and a surge in world oil prices, the reduction in petrol and diesel prices aimed to push economic growth in the oil-rich country.

" Gassim Agricultural Company will save up to SR 4 million in fuel expenses annually. We expect all agricultural companies to save on operational expenses," Sharbaji added.

In a severe downward correction of stock values on the Saudi exchange over the past two months, the agricultural index, representing stocks of agricultural companies, was hardest hit.

In a virtual collapse, the agricultural index lost more than 10,000 points, or 70% of its value, and shrunk from a year high of 14,741.49 points on February 21 to less than 4,000 points by end of April.

"It is unlikely that stocks recover all their previous losses and neither will happen to operational losses, especially that the growing season for many products is over," Sharbatji said.

The agricultural index gained 15.8%, or 632 points, this week, recovering a minimal percentage of its previous losses.

The Saudi bourse had lost about 40% of its value since late February 2006 after over-heating during the past year.

Other top gainers on Tadawul for the past two days include Al Jouf Agricultural Development (JADCO) whose shares gained 21% and Al Mawashi Al Mukairish United Company with a share price increase by 19%.

Members of the Agricultural Committee at the Riyadh Chamber of Commerce called on Tuesday for a reduction in the price of fertilizers by petrochemical companies, which would result in an increase in operational revenues, the London-based daily Asharq al-Awsat reported Wednesday.

"The financial cost of growing agricultural products is expected to decrease by a percentage ranging between 6.5% and 8.1%. The cost of shipping crops will also shrink by 12%," Mohamad Abu Nayyan, the head of the committee, said during the meeting. [TS]

By Mirna Sleiman, APD Staff Writer in Beirut

© APD (Arab Press Digest) 2006