Almarai Co., the largest dairy company in the Gulf region, has acquired 1,790 acres of farmland in California for $31.8 million in order to secure supplies of alfalfa hay for its business, according to Reuters.

 

The company bought the acreage in Blythe, California through its Fondomonte California LLC subsidiary in response to the Saudi government’s elimination of the production of green fodder within the kingdom over the next three years to conserve water resources, according to a statement issued by the cabinet in December. The phasing out of fodder production and the increase in the amount of fodder that Almarai will need to import, will result in Almarai’s cost of production increasing by $53 million in 2016, as it advances toward importing all of its green fodder by 2019.

 

The Saudi government announced last year that it would offer financial support to Saudi investors buying farmland overseas as the kingdom also announced that it was eliminating domestic production of wheat as of 2016 due to ecological pressures. This farmland purchase follows Almarai’s 2014 purchase of 9,834 acres in Arizona, also through its Fondomonte subsidiary, for US$47.5 million.

 

Although this land purchase was driven by Saudi Arabia’s need to initiate reforms for the conservation of water, it happens as California is also in its fourth year of a gripping drought which has caused farmers to fallow 542,000 acres of land and is estimated to have cost the state $2.74 billion in 2015, according to research conducted by the University of California, Davis.