Saudi Arabia Turns Potato Farming Challenge into Export Opportunity

Saudi Arabia Turns Potato Farming Challenge into Export Opportunity
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Saudi Arabia Turns Potato Farming Challenge into Export Opportunity

Saudi Arabia Turns Potato Farming Challenge into Export Opportunity

In the deserts of Hail in northern Saudi Arabia, where rugged mountains border a climate that turns mild in summer and biting in winter, an unlikely agricultural success story has emerged.

From sandy soil that appears unforgiving at first glance, uniform potatoes are harvested to meet the exacting standards of local and international markets, supplying global food companies and contributing to the growth of a thriving export industry.

Grown not on traditional farmland but in a desert landscape long constrained by water and energy shortages, the crop has become a case study in how agricultural innovation and industrial sustainability can converge, positioning Saudi Arabia among the world's exporters of potatoes and processed potato products.

Potatoes in Hail are cultivated in sandy soil that gives the crop sufficient room to grow without deformities, setting it apart from harder soils that reduce quality and market acceptance. The main challenge, however, was not the soil but groundwater scarcity, making the search for innovative irrigation solutions a necessity rather than a choice.

That marked the start of a shift. Farmers have adopted drip irrigation systems powered by solar energy to reduce consumption and increase productivity, transforming Hail into a strategic production hub that contributes to self-sufficiency and exports to global markets.

According to previous remarks by Saudi Industry Minister Bandar Alkhorayef, the kingdom developed an irrigation model tailored to potatoes grown for potato chip manufacturing and export.

Alkhorayef said at the time that PepsiCo, which produces the well-known Lay’s brand, faced difficulties exporting potatoes grown in the kingdom. He stated that the government had collaborated with the Ministry of Agriculture to address the issue.

“They had a valid concern related to water scarcity, so we developed an appropriate irrigation model, which was approved by the agriculture ministry, resolving the export problem,” he said.

According to the Ministry of Environment, Water, and Agriculture, Saudi Arabia experienced a significant increase in potato production in 2023, with output rising by 47 percent to exceed 621,750 tonnes. The self-sufficiency rate reached 86.8 percent, according to the latest officially announced figures.

Hamoud Al Saleh, founder and chairman of Lahaa Agricultural Production, one of the Saudi suppliers to PepsiCo, said the kingdom had exported potatoes to Russia for six consecutive years, in addition to other countries including Norway, Lebanon, Syria and Jordan, while also supplying local factories.

Challenges

Some European markets still face hurdles in importing Saudi potatoes due to the absence of trade protocols, while Norway has proven more flexible, continuing imports over recent years, Al Saleh said.

He said groundwater remains the biggest challenge for farmers. Speaking to Asharq Al Awsat, Al Saleh said PepsiCo supported the company in implementing drip irrigation, covering part of the cost for three years and providing experts to help design and approve the system, which significantly increased productivity.

He said yields per hectare rose to between 50 and 60 tonnes in some fields, alongside a notable reduction in water consumption. He added that Saudi potatoes show high resilience to environmental conditions.

Energy has also been a challenge, with agricultural equipment relying heavily on diesel. This has prompted many farmers to adopt solar power, thereby easing operating costs for both farmers and the state.

Al Saleh unveiled a new project costing 15 million riyals, approximately $4 million, spanning 700 hectares and utilizing a combination of diesel and solar energy, describing it as a long-term investment aimed at enhancing sustainability and reducing consumption.

Resource efficiency

PepsiCo said resource efficiency has become a central pillar of its regional strategy. Ahmed El Sheikh, president and general manager for the Middle East, North Africa and Pakistan, said the company had adopted advanced drip irrigation systems in cooperation with specialized firms and the agriculture and industry ministries.

He said this helped cut water use by around 30 percent compared to traditional irrigation, alongside a shift toward solar energy instead of diesel, which reduced fuel and energy consumption.

Regarding exports, El Sheikh stated that most products are shipped to Gulf states and Jordan, with efforts underway to explore exports to Syria from plants within the kingdom.

In terms of investments linked to Vision 2030, he stated that the company has invested 300 million riyals, approximately $80 million, in new production lines targeting both local and export markets.

He stated that local content reached 95 percent for certain packaging materials that were previously imported, while locally sourced potatoes also achieved 95 percent, with ongoing efforts to reach 100 percent.

Local content refers to the share of raw materials, manufactured inputs, or extracted resources produced inside Saudi Arabia, whether agricultural, industrial, or packaging-related.

Regarding workforce localization, El Sheikh stated that some plants, including the Dammam factory, have achieved Saudization rates of 80 percent, with the appointment of the first Saudi female plant manager.

In research and development, the company stated that it has established an R&D center with investments exceeding 30 million riyals, approximately $8 million, thereby localizing operations within the kingdom instead of relying on overseas centers.

El Sheikh said the company has reached full operational capacity in working with farmers on potato crops, calling it a major achievement that it hopes to replicate with other crops in the future.

Water scarcity by the numbers

This agricultural experience comes amid mounting challenges to water resources. The National Water Strategy says Saudi Arabia has a limited stock of exploitable non-renewable groundwater, with low recharge rates not exceeding 2.8 billion cubic meters annually.

Total water demand is estimated at approximately 24.8 billion cubic meters, with an annual growth rate of around 7 percent.

The strategy states that agriculture is the largest consumer of water in the kingdom, accounting for approximately 84 percent of total demand, and relies heavily on non-renewable resources that make up nearly 90 percent of agricultural water use.

Agriculture ministry data show irrigation efficiency does not exceed 50 percent, compared with more than 75 percent under global best practices. Fodder cultivation alone consumes about 67 percent of agricultural water, according to the latest available figures.

Government role

This shift in potato farming would not have been completed without government support. The kingdom developed and approved an irrigation model suited to potatoes grown for chips and export as the preferred method, prompting PepsiCo to expand its factories in the Eastern Province with investments exceeding 300 million riyals.

This helped make Saudi Arabia the world’s second-largest hub for potato chip manufacturing, according to previous remarks by the industry minister.

Beyond exports, the model strengthens self-sufficiency. Under this approach, Saudi potatoes have become more than just an ingredient in chips, turning into a symbol of integration between agriculture and industry and evidence of the kingdom’s ability to transform environmental challenges into global economic and investment opportunities, in line with the ambitions of Vision 2030.



Middle East War Reshaping National Energy Strategies, Says IEA

 An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)
An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)
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Middle East War Reshaping National Energy Strategies, Says IEA

 An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)
An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)

The Middle East war is pushing countries to open new supply routes and turn to domestic resources to tide over the world's biggest energy crisis, the International Energy Agency said Thursday.

"We are in the midst of the largest energy security crisis the world has ever faced -- and I believe this will reshape investment strategies globally, with parallels to the major changes the energy world witnessed after the oil shocks of the 1970s," said IEA executive director Fatih Birol

"We are already seeing intensified efforts by both producer and consumer countries to diversify trade routes and energy sources -- such as advancing new pipelines and other supply infrastructure, on the one hand, and turning more to domestically available resources, on the other," he added in the World Energy Investment report by the energy agency of the Organization for Economic Co-operation and Development (OECD).

The IEA estimates that global energy investment will reach $3.4 trillion in 2026, slightly higher than the previous year, with around $2.2 trillion devoted to power grids, storage, low-emission fuels, nuclear, renewables, energy efficiency and electrification.

Alongside this, around $1.2 trillion is expected to be invested in oil, natural gas and coal.

It nevertheless expects oil investment to decline for the third straight year in 2026, falling below $500 billion despite rising crude prices.

This is due to uncertainty over how long higher prices will last, project lead times, supply constraints and the tightening offshore rigs market, which are limiting short-term investment outside the Middle East.

By contrast, investment in natural gas is "projected to rise to $330 billion, the highest level in a decade, supported by a wave of new LNG export projects, particularly in the United States and Qatar," IEA said.

At the same time, oil-importing countries are turning to energy sources available domestically, notably renewables, nuclear and coal, the report said.

The IEA estimates that investment in renewables should reach around $665 billion in 2026, including $365 billion for solar alone.

Investment in nuclear energy and is set to exceed $80 billion annually while investment in coal should reach $180 billion -- the highest in 10 years, it said.

China alone will account for nearly 70 percent of global coal supply spending, and some Asian countries may seek to extend the operation of their existing coal-fired power plants in order to strengthen their energy security.

The IEA said investment in electricity supply and infrastructure is expected to reach nearly $1.6 trillion in 2026, including around $550 billion for power grids, while investment in battery storage should exceed $100 billion.


ECB Chief Economist Sees Persistent Impact on Inflation from Iran War

The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
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ECB Chief Economist Sees Persistent Impact on Inflation from Iran War

The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)

The energy shock caused by the Middle East conflict will likely have a persistent impact on inflation even if there is a quick solution to the war, the European Central Bank's chief economist, Philip Lane, said on Thursday.

While oil prices historically tended to revert to original levels after a burst of increases, the current episode may be different as energy costs may stay elevated with countries restocking inventory or diversifying their energy mix, he said.

"We had ‌an overnight, fairly ‌quick and big decline in global oil ‌supply, ⁠which has been ⁠masked until now by inventories," Lane said at a conference hosted by the BOJ and its think tank in Tokyo.

"Even if the initial energy shock starts to reverse, the second round (effects) will be with us for a while," he said.

With the energy shock pushing up prices, financial markets have fully priced in ⁠two hikes in the ECB's 2% deposit ‌rate and see a roughly 50% ‌chance of a third move over the next year. Economists are more ‌cautious and see just two hikes, followed by a cut ‌in mid-2027, a Reuters poll showed.

Lane said there could be some policy lessons from past energy shocks, such as that rising energy costs could push up inflation abruptly and cause "all sorts of non-linear" mechanisms ‌that broaden price hikes.

"But it's not the same non-linearity we had four years ago," when ⁠supply disruptions ⁠from the Ukraine war and strong demand from the COVID re-opening pushed up inflation, he said.

Central banks must acknowledge any substantial shocks and their potential impact on inflation, but avoid overreacting in setting monetary policy, Lane said.

"You have to be skillful in terms of looking at monetary transmission, consumer confidence and all these different mechanisms," he said.

While some inflationary pressures from a supply shock do calm down over time, it was important for central banks to make sure "there's no persistent belief in the population or among price-setting sectors that inflation is going to be too high for too long," he said.


Dollar Firms to One-Week High as Gulf Tensions Flare, Yen Nears Intervention Zone

US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
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Dollar Firms to One-Week High as Gulf Tensions Flare, Yen Nears Intervention Zone

US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)

The dollar firmed to a one-week high on Thursday after Middle East tensions ratcheted up following fresh US strikes on Iran, while the yen softened toward a level that triggered central bank intervention last month.

Iran's Revolutionary Guards said they targeted a US airbase after what they described as an early morning US attack near Bandar Abbas airport, Tasnim news agency reported, while Kuwait's army said its air defenses were intercepting hostile ‌missile and ‌drone threats.

That followed news that the US military ‌carried ⁠out new strikes targeting ⁠an Iranian drone operation that it said posed a threat to US forces and commercial shipping in the Strait of Hormuz.

Oil prices rebounded and the safe-haven dollar steadied as hopes of a swift resolution to the war faded, with investors now increasingly expecting the greenback to break higher as the Federal Reserve shifts its focus to battling inflation amid elevated energy prices.

"Geopolitics and ⁠the subsequent inflation risks remain a key concern," Alex ‌Saunders, Citi's head of global quant ‌macro strategy, wrote. "We continue to see a trim in the USD underweight."

The euro was 0.2% ‌lower at $1.1600, while the pound was down nearly 0.3% at $1.3392.

The risk-sensitive ‌Australian dollar weakened 0.4% to $0.7111to a one-week low, and the New Zealand dollar was down 0.3% at $0.58831.

The dollar index, which measures the greenback's strength against a basket of six major peers, strengthened 0.17% to 99.464, near its highest level since ‌May 21.

Markets will now look ahead to today's release of the Fed's preferred inflation gauge, the core PCE ⁠deflator, which ⁠will help shape the broader interest rate outlook.

The yen weakened to as far as 159.610 per dollar on Thursday, the lowest since April 30 and within sight of the 160 level that triggered intervention by Japanese authorities last month.

That intervention bought policymakers some breathing room, but questions linger over its lasting impact, said Tony Sycamore, market analyst at IG.

"The broader question is whether it was worth it for what essentially amounts to just a single month's relief. And furthermore, will authorities have the stomach to write a similar-sized cheque if the 160 level is breached again in the coming sessions?" he said.

Markets are pricing a roughly 70% chance of a quarter-point interest rate rise at the BOJ's June 15–16 policy meeting, LSEG data showed.