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Saudi Arabia Buying Up Land In The U.S. Southwest To Feed Its Cows

Unable to sustain their own livestock in the desert, Saudi Arabia is scooping up more and more American farmland, with the onus now on drought-stricken U.S. states to raise the crops to feed Saudi dairy cows.

Saudi dairy company Almarai, which in 2014 bought 9,600 acres of farmland in Arizona, has expanded its U.S. farmland holdings to 14,000 acres, causing growing worries about the state of local water reserves in drought-stricken Palo Verde Valley in southern California.

Saudi Arabia is mostly desert, and water is scarce. Yet the kingdom has 170,000 dairy cows that need feed. Alfalfa is a popular cattle feed, but unfortunately, it is also a thirsty crop. Since the kingdom is unable to grow alfalfa locally without reducing its water reserves to an even more dangerous level, it is buying land abroad to grow the plant.

Enter the U.S. Southwest.

Related: Crude Crushed As Production Freeze Hopes Thaw

This region of the United States is the driest, yet it is attractive for the Saudi company because of water rights. California, for instance, has been suffering worsening droughts for the past few years, yet water rights favor farming, specifically in Palo Verde Valley, making the state attractive for the Middle Eastern dairy firm.

While the battle over water rights is intensifying in California, farmers in Palo Verde have “first dibs” on water from the Colorado River. Likewise, where the Saudis bought farmland in Arizona, water rights are friendlier to farmers.

As AP reports, Almarai is by no means the only company taking advantage of favorable legislation in the U.S. Companies from the UAE, China, and Japan, have also jumped on this bandwagon, buying up farmland in the U.S. and elsewhere and then exporting the crops back home. It’s proven, for them, to make more economic sense than to grow at home.

Related: Saudi Policy Tied to Weak Economy

It seems, however, that the Saudi farmland is rubbing Americans the wrong way, perhaps because of the size of its holdings or because of the fact that Saudi Arabia is the United States’ main rival in oil, and the country that many blame for the current state of the oil market; not to mention the recent trend to see Saudi Arabia as more of a threat after long years of “partnership”.

And water is a strategic asset that brings up myriad sensitivities, much like oil.

The comments sections on the AP story paint a picture of disgruntlement and resentment about water rights in the U.S. While every drop of urban citizens’ water is measured and most residential lawns are nearly grassless and brown, farmers—including non-U.S. farmers—can essentially divert river water or other natural water sources as much as they like to grow their crops, even if these crops are then exported to feed foreign cows.

Related: Oil Falls As Saudi Arabia Questions Freeze Deal

There are, however, voices that note Almarai’s water conservation efforts. According to data from the Arizona Department of Water Resources cited in the AP story, the level of the wells in Almarai’s property in Arizona has actually risen recently. The company also helps the local economy in the form of buying alfalfa hay from neighboring farms.

For Saudi Arabia, buying land abroad helps the country maintain its food security and preserve what remains of its water reserves. For Arizona and California residents, sharing what little water there is with the Saudis while being asked to not water your lawn creates some resentment.

In the end, the Saudi’s can afford the land, and the current U.S. law allows them to use the water. In this environment, calls for a change in legislation are likely to intensify, and that change could become a reality before the Southwest turns into a Middle Eastern-style desert.

By Irina Slav for Oilprice.com

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