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Cablegate: Response: Impact of Rising Food/Commodity Prices - Croatia

VZCZCXRO5179
RR RUEHAG RUEHAST RUEHBW RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVB #0348 1211034
ZNR UUUUU ZZH
R 301034Z APR 08 ZDK
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC 8868
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS ZAGREB 000348

SIPDIS

DEPARTMENT FOR EEB/TPP/ABT/ATP Janet Speck

E.O. 12958: N/A
TAGS: EAGR ECON ETRD PGOV HR
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES - CROATIA

REF: A. STATE 39410, B. ZAGREB 310

1. This cable responds to reftel A.

2. The most important food and agricultural commodities consumed in
Croatia are wheat, corn (as animal feed), sunflower seeds (as edible
oil), poultry, beef/veal, pork, and dairy products. Croatia produces
enough wheat and poultry for its own needs. Corn is produced in
surplus; pork is produced in sufficient quantities but certain
quality cuts are imported; oil seeds and dairy products are produced
but in insufficient quantities.

3. Grain prices in March 2008 on the Croatian market were 49% to 93%
higher than in March 2007. High grain prices drove meat and dairy
prices up, such that food prices in March 2008 were 10.2% higher
than in March 2007. Fruits and vegetables, edible oil, bread,
grains, dairy products and eggs saw the largest price increases.
Some large meat producers have warned wholesale buyers to expect a
20-30% increase in prices in May. The price increases have not
caused a significant shift in consumption towards alternative
commodities, though there has perhaps been a decrease in consumption
in general.

SUPPLY

4. Domestic agricultural production is responding to changes in
prices. Farmers are shying away from pork production because of high
feed prices (mainly corn). Many would like to produce corn, due to
the availability of state subsidies and the expectation that the
high price will linger. Currently, a shortage of cold storage is
contributing to losses of domestic vegetable production. Investment
in food production has not increased significantly, nor has the
amount of land in use for food production increased or decreased
significantly.

POLITICAL IMPACT

5. Rising food prices, along with fuel prices, have been the primary
driver of inflation in Croatia and have raised concern among the
public. Inflation and particularly the rise in food prices have
received considerable media attention. On April 12, labor unions
organized a demonstration in Zagreb that drew about 40,000 people,
the largest protest crowd in recent history. The official theme of
the demonstration was "together for higher pay," but inflation was
also a concern motivating many who attended. The event has had no
direct effect on government policies or stability. (reftel B)

6. The food price situation has not caused friction between classes,
ethnic groups, or urban and rural populations. It has had no effect
on attitudes towards biotechnology (still negative), although
attitudes towards biofuels are changing slightly from positive to
skeptical.

ECONOMIC IMPACT

7. Inflation grew the last five months of 2007 and reached 5.8% in
December, due mainly to high oil and food prices, as well as high
prices of agricultural products. Inflation has remained near 6% thus
far in 2008. Croatia's economic growth is expected to slow from 5.6%
in 2007 to 4.3% in 2008.

GOVERNMENT POLICY RESPONSE

8. In autumn 2007, in an attempt to prevent a shortage of grain, the
GOC placed temporary (until summer 2008) export tariffs on corn and
wheat. The GOC has also temporarily lifted import tariffs on
specified quantities of corn, wheat, and raw sunflower oil.

9. The food price increases have had no significant environmental
impact thus far. Nor have the had a major effect on post programs.

BRADTKE

© Scoop Media

 
 
 
 
 
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