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Wheat And Water Subsidy Datapoints Of The Day

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by Felix Salmon
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Jun 23 2008 12:00am EDT

Wheat and Water Subsidy Datapoints of the Day

Elie Elhadj reports on Saudi Arabia's misadventures in agricultural subsidies:

Between 1980 and 1992, wheat production grew 29-fold--from 142,000 tons in 1980 to 4.1 million tons in 1992--making the Saudi desert the world's sixth-largest wheat exporting country...
For the sixteen years between 1984 and 2000, it may be estimated that the assessable cost of Saudi agricultural development could be put at about $85 billion, representing 18 percent of the country's $485 billion in revenues from oil exports during the period. This huge investment produced wheat at an average cost of more than $500 per ton. During the same period, the international market price for wheat averaged about $120 per ton. When the waste resulting from abandoning the newly reclaimed and irrigated lands plus four unquantified government subsidies are added, the cost might more than double...
Between 1980 and 1999, a gargantuan volume of water--300 billion cubic meters, the equivalent to six years' flow of the Nile River into Egypt--was used in Saudi Arabia's agricultural adventure. Two-thirds of the water thus used is regarded as nonrenewable, according to estimates by the Ministry of Agriculture and Water (MAW).

And here's the punchline: as Alexander Campbell points out, $500 per ton is actually lower than the current market price of wheat.

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