Why Saudi Arabia bought 14,000 acres of US farm land

The Middle Eastern kingdom needs hay for its 170,000 cows. So, it's buying up farmland for the water-chugging crop in the drought-stricken American Southwest.

(AP Photo/Grand Forks Herald, John Brose, File)
Saudi Arabia has 170,000 dairy cows - similar to these - it needs to feed. So, it's buying up alfalfa farms in the US. In this March 2013 photo dairy cows are milked by the Rahlf brothers of Binford, N.D.

Saudi Arabia's largest dairy company will soon be unable to farm alfalfa in its own parched country to feed its 170,000 cows. So it's turning to an unlikely place to grow the water-chugging crop — the drought-stricken American Southwest.

Almarai Co. bought land in January that roughly doubled its holdings in California's Palo Verde Valley, an area that enjoys first dibs on water from the Colorado River. The company also acquired a large tract near Vicksburg, Arizona, becoming a powerful economic force in a region that has fewer well-pumping restrictions than other parts of the state.

The purchases totaling about 14,000 acres have rekindled debate over whether a patchwork of laws and court rulings in the West favors farmers too heavily, especially those who grow thirsty, low-profit crops such as alfalfa at a time when cities are urging people to take shorter showers, skip car washes and tear out grass lawns.

"It's not easy to completely grasp the business model of the Middle East, but it may not be about business at all," said John Szczepanski, director of the U.S. Forage Export Council. "The primary focus is food security, and the means to that end lie in acquiring the land and resources to ensure long-term supply."

For decades, Saudi Arabia attempted to grow its own water-intensive crops for food rather than rely on farms abroad. But it reversed that policy about eight years ago to protect scarce supplies.

To further conserve water, the country has adopted bans on selected crops. This year, the kingdom will no longer produce wheat. In December, the government announced the country will stop growing green fodder, livestock feed derived from crops like alfalfa, over the next three years.

Almarai already farms worldwide to make sure that weather, transportation problems or other conditions don't interrupt supplies. The expansion in the American Southwest was a "natural progression" in its effort to diversify supply, said Jordan Rose, an attorney for the company's Arizona unit.

"The cows feed multiple times a day, and they need to be certain that they are always able to fulfill that unwavering demand," she wrote.

Despite the widespread drought conditions, the U.S. is attractive to water-seeking companies because it has strong legal protections for agriculture, even though the price of land is higher than in other places.

"Southern California and Arizona have good water rights. Who knows if that will change, but that's the way things are now," said Daniel Putnam, an agronomist at the University of California, Davis.

Over the last decade, Saudi Arabia and the United Arab Emirates emerged as significant buyers of American hay as their governments moved to curb water use. Together they accounted for 10 percent of U.S. exports of alfalfa and other grasses last year.

The land purchases signal that Almarai doesn't just want to buy hay; it wants to grow. And it's not the only Arab-owned Gulf company to take that approach.

Al Dahra ACX Global Inc., a top U.S. hay exporter based in Bakersfield, California, is owned by Al Dahra Agriculture Co. of United Arab Emirates. It farms extensively in Southern California and Arizona and, according to its website, plans to add 7,500 acres in the United States for alfalfa and other crops. The exporter packages crops grown across the West at its two plants in California and one in Washington state.

Most of the farms that Arab companies own worldwide are in developing nations. For instance, Qatar's sovereign wealth fund has holdings in Latin America and Africa.

But part of the kingdom's long-term food security strategy means investing in higher-cost countries with greater political stability, said John Lawton, owner of Agriculture Technology Co., a farming company in Saudi Arabia.

In 2014, Almarai paid $47.5 million for more than 9,800 acres in La Paz County, Arizona, a sparsely populated alfalfa-growing region that is exempt from severe restrictions on pumping imposed on Phoenix, Tucson and other large Arizona cities under a 1980 state law designed to protect the state's aquifers.

It later turned to the Palo Verde Valley, where Southern California settlers staked claim to the Colorado River in 1877, beating Los Angeles and San Diego under a Gold Rush-era doctrine called "first in time, first in right" that governs the 1,450-mile waterway. The company paid $31.5 million for 1,790 acres in January after buying about 2,000 acres there last year.

Farmers and water experts have greeted Almarai with both cheers and jeers.

Supporters note that the company has embraced water-conservation methods that few other farmers have adopted. The Arizona Department of Water Resources released maps that show well levels on Almarai's property in La Paz County rose in recent years, and the farm's footprint has remained about the same since 2000.

In California, some farmers say Almarai is a well-run company that has boosted the economy by growing its own alfalfa and buying more hay from neighboring farmers. The company recently broke ground on a plant in California's Imperial Valley to package hay into ship-ready bales.

Others say the purchases highlight misguided water policies. La Paz County Supervisor Holly Irwin raises concern that Almarai will deplete wells.

"We've got them coming, moving in here and using our natural resources up. Why isn't anyone paying attention to the ground we live on?" she said.

Christopher Thornberg, an economist at the University of California at Riverside, called alfalfa farms a "shocking waste of a resource" and suggested California consider seizing land under eminent domain.

"At some point in time," he said, "we have to face the fact that the state cannot continue to prosper under the current circumstances."


Batrawy reported from Dubai, United Arab Emirates.

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Q: Why is Saudi Arabia's largest dairy company buying U.S. land?

A: To conserve water, the country has adopted bans on selected crops. Agriculture accounted for 90 percent of Saudi Arabia's water consumption, according to a 2013 study by the Oxford Business Group.

Saudi Arabia identified the United States as one of 16 countries for agricultural investment in 2010, according to a memo from the U.S. embassy in Riyadh to the U.S. Agriculture Department that was obtained by WikiLeaks. The embassy said the investment could be "a tangible demonstration of the value of outreach to the Muslim world and (could) offer an opportunity to broaden and deepen our relationship." The memo noted that while food security has not been a major problem in Saudi Arabia, "food prices have become politically sensitive."


Q: What do the locals think?

A: Some have raised concern about the amount of water needed but many welcome the economic boost that Almarai has given as worries about China have dimmed prospects for alfalfa exports. Jack Seiler, who farms about 3,800 acres in Palo Verde Valley, now sells about 30 percent of his harvest to Almarai, compared with nothing a few years ago.

"They're banging it out, I'm telling you," said Seiler. "They kind of cleaned us out of summer hay ... They want to farm."

Seiler voices more concern about the Metropolitan Water District of Southern California. Last year, the nation's largest distributor of drinking water became Palo Verde Valley's largest landowner, tapping a deep distrust between farm and city that pervades the West.


Q: What are the water rights in these areas?

A: Palo Verde Valley enjoys California's first rights to water from the Colorado River, a lifeline to seven Western U.S. states and northern Mexico. A 1922 compact that parceled out allotments gave California more than 10 times what Nevada got.

California long consumed more Colorado River water than it was entitled to, which was never a problem until Sunbelt cities like Phoenix and Las Vegas began to clamor for their full share. A 2003 truce among California's warring water agencies kept the Palo Verde Irrigation District at the front of the line and also left the agricultural Imperial Valley near the top of the pecking order. That honored a Gold Rush era-doctrine that the first settlers to stake claim hold the highest-priority rights.

La Paz County, Arizona, is free of well-pumping restrictions that hamstring many of the state's largest cities under a 1980 law to protect aquifers. The city of Phoenix bought about 13,000 acres there in 1986 and sold it in 2012 after giving up on building infrastructure to carry water about 100 miles to the nation's sixth-largest city. The city of Scottsdale has about 1,200 acres in the area on the premise that it will eventually have a system to move water from farm to city.

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