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Cablegate: Response: Impact of Rising Food/Agricultural

VZCZCXRO5555
PP RUEHMA RUEHPA
DE RUEHNM #0446/01 1140941
ZNR UUUUU ZZH
P 230941Z APR 08
FM AMEMBASSY NIAMEY
TO RUEHC/SECSTATE WASHDC PRIORITY 4263
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEHRO/AMEMBASSY ROME PRIORITY 0263

UNCLAS SECTION 01 OF 03 NIAMEY 000446

SIPDIS

SENSITIVE
SIPDIS

EEB/TPP/ABT/ATP FOR JANET SPECK; ACCRA FOR USAID;DAKAR FOR
USAID/FFP AND OFDA; ROME FOR FODAG

E.O. 12958: N/A
TAGS: EAGR EAID ETRD ECON PGOV PREL NG
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/AGRICULTURAL
COMMODITY PRICES -- NIGER

REF: (A) STATE 3941 (B) NIAMEY 423 (C) NIAMEY 414 (D)

NIAMEY 238

------------
Introduction
------------

1. (U) As one of the poorest countries in the world, Niger
will be among the hardest hit by rising food prices. Post
has reported on food developments (refs b, c, and especially
d), and will continue to do as the situation evolves. Much
will depend on the fall harvest, which will in turn depend on
the summer rains and developments in world and regional
markets, particularly Nigeria. Largely as a result of the
2005 food crisis, the GON and donors have implemented
mechanisms to monitor the food situation. The Famine Early
Warning System Network (FEWSNET) is monitoring regional
developments as they relate to Niger. Following is a
snapshot of the current situation, keyed to ref A tasker.

------
Demand
------

2. (U) Rice is the most important staple for urban consumers,
although wealthier consumers also eat bread. The vast
majority of rice and wheat is imported. Millet and sorghum
are the most important staples for rural consumers, who
comprise 85 percent of the population. Much of the millet
and sorghum are grown locally by subsistence farmers. Most
of those farmers do not produce enough for their own needs
and resort to buying food once they have exhausted their
harvest. In the last year, prices have increased by 23
percent for rice, 33 percent for bread, 17 percent for
millet, 21 percent for sorghum, 44 percent for corn and 28
percent for cowpeas. (Those increases are in cfa francs.
The percentage increases would be even greater in dollar
terms since the cfa franc is fixed against the euro, and has
therefore appreciated against the dollar.) Urban consumers
may respond to higher rice and bread prices by shifting
consumption to millet and sorghum. Some traders may be
stockpiling cereals in anticipation of even higher prices.

3. (U) Niger is a net importer of food. In recent years its
imports have averaged about 8 percent of its consumption.
Higher fuel prices have exacerbated the effect of higher food
prices, particularly in the more distant parts of the
country. A conflict which began in February 2007 has made
the situation particularly bad in the north, and it has also
made it more difficult to assess the situation there.

------
Supply
------

4. (U) There has been little or no supply response to higher
prices. Most agriculture is rain-fed, and the supply is
therefore determined by rainfall. Most Nigerien farmers do
not have the resources to increase production, and virtually
all arable land is already being farmed. While most cereals
are grown without irrigation or fertilizer, some fruits and
vegetable farming uses irrigation and fertilizer, and is
therefore adversely affected by higher fuel (for pumps) and
the doubling of fertilizer prices. Rainfall this summer will
determine pasturage next year, which will affect meat prices.
If pasturage is poor, herders will sell more cattle,
reducing the price.

5. (U) The market for food in Niger is driven to a large
degree by developments in its much larger southern neighbor,
Nigeria. Normally Nigeria exports grain to Niger, but there
are signs that the trade is now going the other way.
Anything that raises prices in Nigeria will tend to pull up
prices in Niger as well. The governments of Burkina Faso and
Mali have restricted exports, cutting off a normal supply of
food. The elimination of subsidized powdered milk imports
from Europe has negatively affected Niger, particular the
domestic dairy products industry and the domestic production
of plumpynut (a food aimed at malnourished children).

----------------
Political Impact
----------------

6. (SBU) There have not been any political protests against
rising food prices -- yet. Higher food prices have
contributed to demands for higher wages by the small number

NIAMEY 00000446 002 OF 003


of Nigeriens who have paid jobs. The GON suspended for three
months the duties on imported rice to mitigate the effect of
higher world prices. That suspension will probably be
extended. Ref C provides additional detail on how the food
situation is related to the ongoing conflict in the north, as
well as the political and economic situation. There are
reports of Nigeriens in the south-central region migrating to
Nigeria in search of food.

---------------
Economic Impact
---------------

7. (U) Given that food constitutes a large share of the
average Nigerien's budget, the higher food prices clearly
represent a sharp increase in the cost of living. The GON's
suspension of duties on imported rice has a large effect on
the GON budget in terms of lost revenues. Demands for higher
civil service salaries, fueled in large part by the rising
food prices, will also likely lead to increased government
expenditures. Ref B provides additional detail on the
economic situation.

--------------------
Environmental Impact
--------------------

8. (U) There is no discernible environmental impact at this
time.

--------------------------
Government Policy Response
--------------------------

9. (SBU) Food is a politically sensitive issue in Niger,
particularly after the controversy over whether the 2005 food
crisis was a "famine." President Tandja, whose background is
the military rather than agriculture, tends to micromanage
food policy, down to determining soil conservation methods
and prohibiting food for work. The prohibition of food for
work programs last year necessitated revisions in the PL-480
programs, which has delayed non-emergency PL-480 food aid.
The GON may be reluctant to admit the severity of the food
crisis, which could delay GON and donor actions to alleviate
the situation. It is also reluctant to allow free food
distribution to vulnerable groups. The GON recently bought
10,000 MT of imported rice that was already in the country.
It had hoped to buy 15,000 MT, but was unable to do so
because prices had risen from cfa 250,000/ton less than a
year ago, to cfa 318,000/ton now. It has urged traders to
release food stocks. As noted above, it has suspended duties
on imported rice.

-----------------------
Impact on Post Programs
-----------------------

10. (SBU) The food situation has not affected post programs.
It could potentially lead to demands for higher wages on the
part of locally engaged staff and create security issues if
there is urban unrest. It clearly affects USG food aid
programs. USAID does not have a mission here; Food aid is
handled by the Food for Peace Office in Dakar, which may be
able to provide details.

----------------
Policy Proposals
----------------

11. (SBU) On one level, the policy response is obvious --
ensure adequate levels of food aid for free distribution for
vulnerable groups. In practice, the problem is complicated
by uncertainty about the extent and details of the problem.
The donor community is actively monitoring the situation,
including updating the list of vulnerable populations. A
donor response may be complicated by GON reluctance to admit
the severity of the problem and capricious decisions
regarding the type of aid it will accept and the conditions
for its distribution.

12. (SBU) The Embassy specifically recommends that the USG
treat the situation in Niger as an emergency. Niger is
chronically on the verge of a food crisis, and rising world
food prices will likely push it over the edge. A poor 2008
harvest will greatly exacerbate the situation. Food For
Peace should have a regular presence in Niger to follow and
report on developments, and coordinate with the government

NIAMEY 00000446 003 OF 003


and other donors. We recommend accelerating the delivery of
planned non-emergency food. Currently, call forwards for
this assistance is planned for May, with delivery in
September. That lag time needs to be reduced.
KORAN

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