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Cablegate: Burma: Food Prices Dropping, Fuel Costs Back to Normal

VZCZCXRO9213
RR RUEHCHI RUEHDT RUEHHM RUEHNH RUEHTRO
DE RUEHGO #0401/01 1420227
ZNR UUUUU ZZH
R 210227Z MAY 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 7638
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1885
RUEHBY/AMEMBASSY CANBERRA 1215
RUEHKA/AMEMBASSY DHAKA 4890
RUEHNE/AMEMBASSY NEW DELHI 4759
RUEHUL/AMEMBASSY SEOUL 8303
RUEHKO/AMEMBASSY TOKYO 5865
RUEHCN/AMCONSUL CHENGDU 1484
RUEHCHI/AMCONSUL CHIANG MAI 1613
RUEHCI/AMCONSUL KOLKATA 0342
RUEATRS/DEPT OF TREASURY WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHGV/USMISSION GENEVA 3737
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1648
RUEKJCS/SECDEF WASHDC
RUEHBS/USEU BRUSSELS
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 02 RANGOON 000401

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EEB/TPP/ABT/ATP - JANET SPECK
BANGKOK FOR USDA/FAS, ECON OFFICE, USAID
DEPT PLEASE PASS TO USAID - CHERYL JENNINGS
PACOM FOR FPA
TREASURY FOR OASIA:SCHUN

E.O. 12958:N/A
TAGS: EAGR EAID ETRD ECON PGOV PREL BM
SUBJECT: BURMA: FOOD PRICES DROPPING, FUEL COSTS BACK TO NORMAL

Ref: A) Rangoon 398 B) Rangoon 368 C) Rangoon 390

RANGOON 00000401 001.2 OF 002


1. (SBU) Summary. Two weeks after Cyclone Nargis devastated Burma,
food prices have begun to drop, although most prices remain higher
than pre-cyclone levels. While certain food items - rice, cooking
oil, and chicken - remain scarce, prices of these prices have
dropped slightly in the past few days. Prices of other key
commodities, including pork, potatoes, onions, salt, and bottled
water, have dropped substantially now that more of these products
are available in local markets. Fuel prices have returned to
pre-cyclone levels; petrol now costs 4,500 kyat a gallon and diesel
costs 5,500 kyat a gallon. Decreased demand and increased supply of
fuel account for the decrease in price. End Summary.

Same Demand, Greater Supply
---------------------------

2. (SBU) During trips to various markets around Rangoon during the
past few days, we observed vendors selling a wide variety of food,
much of which was imported from Northern Burma. Vendors told us
they received increased supplies of many food products, including
onions, potatoes, and pork, in the past few days due to improved
supply lines. As a result, prices of these products have decreased,
although they remain higher than pre-cyclone levels (Ref B). On May
18, onions sold for 500 kyat ($0.45) per viss (3.6 lbs), a 37.5
percent decrease from May 12 prices of 800 kyat ($0.72) per viss.
Salt prices also decreased by 42 percent, down from 2800 kyat
($2.54) a viss to 1600 kyat ($1.45) a viss on May 18. Supplies of
pork were also readily available, reducing the price per viss from
8,000 kyat ($7.27) to 6,500 kyat ($5.90).

3. (SBU) Rice prices are still high due to limited supply.
However, we observed a slight reduction in both the price of ehmata
rice (25 percent broken rice) and inferior rice since May 12. On
May 18, one bag of ehmata rice (69 lbs) sold for 43,200 kyat ($39),
an 8 percent price reduction. Inferior rice sold for 21,600 kyat
($19.50) a bag, down from 24,000 kyat ($21.81) last week. Prices of
chicken, beef, fish, and cooking oil remained the same.

--------------------------------------------- -------
Selected Commodity Prices, Rangoon
As of May 19, 2008
In Kyat
--------------------------------------------- -------
Good Pre-Storm Post-Storm Percent
Price Price Increase
--------------------------------------------- -------
Ehmata Rice 24000/bag 43200/bag 80.0
Inferior Rice 15000/bag 21600/bag 44.0
Peanut Oil 4500/viss 5000/viss 11.0
Soybean Oil 4500/viss 6500/viss 45.0
Palm Oil 3200/viss 3600/viss 12.5
Pork 6000/viss 6500/viss 8.3
Chicken 6000/viss 7000/viss 17.0
Fish 4000/viss 6000/viss 50.0
Salt 1500/viss 1600/viss 6.7
Onions 300/viss 500/viss 66.7
Potatoes 400/viss 1000/viss 150.0
Purified Water 300/liter 300/liter --
--------------------------------------------- -------
*1 viss=3.6 lbs or 1 viss=2 liters


4. (SBU) During the past week, supermarkets, such as City Mart and
Asia Light, have begun to restock their shelves with new products.
City Mart Managing Director Win Win Tint told us that many companies

RANGOON 00000401 002.2 OF 002


have slowly received the shipments that were delayed by the storm.
Not all the products were the same, she stated, but supermarkets now
could import goods such as cooking oil, noodles, butter, and cheese.
Win Win Tint admitted that prices in City Mart were higher, around
10-20 percent depending on the product, due to higher shipping and
transport costs. As things return to normal, she said, prices
should return to pre-cyclone levels.

Fuel Prices Return to "Normal"
------------------------------

5. (SBU) During the past few days, the black market price of fuel
has dropped, returning to pre-cyclone levels. On May 18, the price
of gas per gallon was 4,500 kyat ($4), down from 5,000 kyat per
gallon on May 12. Similarly, diesel prices per gallon dropped by 8
percent, from 6,000 kyat ($5.45) per gallon on May 12 to 5,500 kyat
($5) per gallon on May 18. We also observed fewer cars queuing at
gas stations around town, with the average wait time decreasing to
approximately half an hour or less. Gas stations still restrict car
owners to no more than six gallons of gas at one time, and only 14
gallons per week.

6. (SBU) According to economic contacts, fuel prices have returned
to "normal" because of a significant drop in demand. As the GOB
restores electricity to more townships in Rangoon, fewer homes and
businesses have to rely on diesel generators for electricity (Ref
C), increasing the available supply of diesel on the market.
Additionally, private businesses continue to bring in an average of
three diesel shipments of 10,000 gallons each per week and at least
one petrol shipment, both of which are sold on the local markets.


Comment
-------

7. (SBU) A steady, albeit limited, supply of food entering
Rangoon's markets, has allowed prices to fall. Several of Burma's
ports have resumed limited operations, enabling approximately ten
ships a day to deliver imported goods. As the situation in Rangoon
improves, additional ways to transport food into the city will
develop, reducing market pressure and increasing the supply of
available commodities. Fuel prices have already returned to
pre-cyclone levels; it is only a matter of time before food prices
do the same.


VILLAROSA

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