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Saudi Arabia: Rice 'price war' at its peak

RIYADH - The months-long "price war" between major rice traders has reached its peak, informed business sources have claimed.

The "price war" began when some merchants started selling rice at much lower than the average cost price, sources said, describing "this kind of competition" in the market as "not good" because it would harm the interests of consumers who will be sold inferior quality or "adulterated" rice.

According to a report in Al-Watan Arabic daily newspaper Saturday, stores have confirmed that prices have declined in the last few weeks.

The prices, they claim, are lower than they were at the same time last year.

The commodity report issued by the Ministry of Commerce and Industry also said rice prices are declining slightly.

Muhammad Al-Shalaan, Director General of Al-Shalaan Rice Company, fears that consumers will be harmed eventually.

"Prices cannot go lower than they are now, but if they do, it would be the result of a price war that started between merchants several months ago."

He said current prices are 10 percent less than the cost price. "For example, a 10-kilo bag is sold for less than SR46, while the logical price is SR50."

"The fact is that merchants must have a good profit margin that enables them to continue carrying out this important economic activity," he said.

When asked about the steps he intends to take if one or more merchants reduced prices further, Al-Shalaan said his company would not do the same. "We'll just leave the choice to the consumer who would naturally look for the higher quality."

A major rice merchant in the Kingdom, who preferred to remain anonymous, said it was "not possible" for the current prices to continue until the end of the year. He expected prices to start rising by the last week of Ramadan.

Abdulaziz Al-Othaim, Executive President of Abdullah Al-Othaim Shopping Center, said it is unlikely that prices would decline further.

The rice market in the Kingdom is estimated to be worth more than SR4.5 billion. The country imports between 1 and 1.3 million tons of rice and an individual consumes 45 kilograms annually which is higher than the global standard. For example, Iran's consumption of rice is about two thirds of Saudi Arabia's, while its population - 75 million - is more than double that of the Kingdom.

© The Saudi Gazette 2010