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Cablegate: Iraqi Trade Minister Discusses Grain Import

VZCZCXYZ0000
RR RUEHWEB

DE RUEHGB #3498/01 3091321
ZNR UUUUU ZZH
R 041321Z NOV 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0213
INFO RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS BAGHDAD 003498

SENSITIVE
SIPDIS

STATE FOR NEA-I ECON
USDA/FAS/OCRA FOR LSHATZ, AALLEN, CMCKINNEL
USDA/FAS/OGA FOR MSHEAN, MHOUSE
USDA/FAS/OFSO FOR RVERDONK

E.O. 12958: N/A
TAGS: EAGR ECON ETRD IZ
SUBJECT: IRAQI TRADE MINISTER DISCUSSES GRAIN IMPORT
SITUATION

Summary
-------

1. (SBU) FAS and FCS Attaches met October 27 with Minister of
Trade Dr. Abdul-Falah Hassan Al-Sudani and other MoT
officials to discuss the Iraqi grain import situation,
planned GOI renovations at the port of Umm Qasr, and the
Public Distribution System (PDS), the GOI's subsidized food
distribution program. Given substantial declines in
commodity prices and freight rates, MoT was encouraged to
tender for their intermediate import needs now. The MoT
expects to issue tenders in November provided funding is
available. With renovations slated for Umm Qasr to begin in
thirty to forty five days, the next tenders will likely
include freight specifications for on-board discharge
capability for break bulk grain shipments. MoT notes it is
prepared to assist in any Ministry of Agriculture (MoA)
tendering, discharging and transportation for feed barley
imports, provided the MoA comes up with the cash to do so.
End Summary.

Wheat Import Situation Stable
-----------------------------

2. (SBU) Minister Al-Sudani and Director General of Grain
Board of Iraq (GBI) Mr. Muthanna Jabar described for us on
October 27 a variety of ongoing MoT market activities. The
GBI's current strategy with respect to wheat is to import
lower-priced Romanian and Russian grain and blend it with
higher quality U.S., Canadian, and Australian product to
produce flour with the desired protein (gluten)
characteristics needed for Iraqi bread products. This
approach is likely to continue, as the MoT seeks ways to
control costs for Iraq's leading agricultural import,
estimated at 3.7 million tons in 2008/09 (July-June basis).

Cash on the Barrelhead for Barley and MoT Seed Stocks
--------------------------------------------- --------

3. (SBU) The Ministry of Trade and the GBI noted that they
are prepared to provide assistance for the MoA's plan to
import 200,000 tons of feed barley, provided that MoA pays.
This assistance would likely include the
tendering/discharging/local transportation of the grain,
again dependent on MoA funding. (Note: MOA has reported
separately that they lack funding as of yet for doing this.
End note.)

4. (SBU) As for distribution of wheat seed from MOT stores of
milling wheat, again MoA will have to pay for the product.
In addition, the MoT stocks are described by the Minister as
not the best product for a seed distribution program, because
the milling wheat has not been properly cleaned for seed use.
Similar to the case for planned barley importation, MoA
reportedly has been slow to transfer funds to MoT to purchase
the wheat seed. Distribution of MoT-owned barley for seed
use faces the same situation as wheat seed. The Minister
questioned whether the GoI should be distributing barley from
MOT stocks at all, since it's not really seed quality. The
Minister did confirm that wheat bran from GOI-owned flour
mills is supposed to be sold at subsidized prices to
livestock producers for feed, but didn't provide any details
regarding price levels.

PDS and The Web of Subsidies
----------------------------

5. (SBU) Minister Al-Sudani also discussed subsidies,
including the MoT-operated PDS monthly food distribution
scheme. The Minister said that the GOI has to "get out of the
business of subsidizing everything." The challenge,
according to the Minister, is to pursue PDS modification
while avoiding the political backlash that could result.
During a separate meeting with EMIN, Al-Sudani said that the
ministry had made some progress in moving toward PDS reform
due in part to the improving security situation, and that
they were exploring different ways of effecting further
reform, to include -- over the long term -- monetization of
benefits. The different options posed different challenges,
he said, stating that monetization, for example, would
require significant enhancements in the banking system. He
opined that Iraq will take its "first step" toward indirect
support in "early or mid-2009." (Comment: This would appear
to be a highly ambitious timeline. End comment.)

Grain Handling at Umm Qasr Slated for Renovation
--------------------------------------------- ---

6. (SBU) According to GBI and the Minister, Umm Qasr's grain
discharge facilities, specifically the "vaccuvator" system
used to pull grain from bulk holds, will be renovated in the
near future. The refit is expected to begin in 30-45 days,
and will take an estimated 3 months to complete. During that
time, discharge rates will decline by 50 percent at the one
berth where the upgrade will occur, necessitating the
inclusion in shipping contracts for self-discharge capability
(shipboard cranes with grabs) for grain vessels destined for
Umm Qasr. According to the GBI, the renovation will increase
daily discharge rates to 8,000 to 10,000 metric tons at the
improved berth. Current actual rates for break bulk grain
appear to average in the 3,800 metric ton range per berth,
with frequent notes in vessel discharge reports of work
stoppages due to equipment breakdown. We have scheduled
follow-up meetings with GBI to further discuss the renovation
and its impact on shipping and the local market in the near
term.
CROCKER

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