Saudi General Grains Organisation (Sago) is looking to sell a stake to a strategic buyer as part of its privatisation for which HSBC's Saudi Arabian arm has been chosen as its advisor, sources aware of the matter said.

The agency in charge of the kingdom's extensive wheat-buying programme is one of the first to appoint an advisor as the kingdom eyes the privatisation of a host of state bodies under its recently-announced Vision 2030 economic plan, a move to bridge budget shortfalls caused by lower oil prices.

This programme of privatisations will encompass a range of different acts for each situation, from corporatising government bodies, sales of stakes to strategic shareholders, to listings on the local stock market.

Sago, which handles the storage and operation of silos and production at mills, is looking to sell a stake to a partner, said one of the sources.

Sago, which was previously called the General Silos and Flour Mills Organisation (GSFMO), was not immediately available for comment. The sources spoke on condition of anonymity as they were bound by confidentiality agreements.

The agency's director-general, Ahmed al-Fares, said in February that he expects Saudi Arabia to complete the privatisation of its flour mills by the first quarter of 2017, although the Public Investment Fund (PIF) determines the final timeframe.

The Saudi cabinet in November approved the establishment of four joint-stock companies to operate the flour mills. These were to be overseen by the state-owned PIF in coordination with Sago.

The PIF has assumed newfound prominence in Saudi Arabia, after the deputy crown prince announced that it would take control of some of the kingdom's most prized assets to become the world's largest sovereign wealth fund.

While a number of regional players would likely be interested in taking a stake in Sago, the Saudis would prefer bringing in a global partner, said a separate industry source.

Saudi Arabia has become a major importer of hard and soft wheat since abandoning plans for self-sufficiency in wheat in 2008, as farming in the desert drained scarce water supplies.

Sago has said that demand for wheat in Saudi Arabia is expected to grow at an annual rate of 3.2 percent to reach 4.5 million tonnes a year by 2025, largely due to population growth. The state grain agency is expected to import around 3.5 million tonnes of the grain in 2016. – Reuters