Cablegate: Got Extends Rice Import Moratorium

Published: Fri 3 Oct 2003 06:37 AM
This record is a partial extract of the original cable. The full text of the original cable is not available.
E.O. 12958: N/A
SUBJECT: GOT Extends Rice Import Moratorium
Sensitive but Unclassified. Not for Internet Distribution.
1. (SBU) Summary: The Government of Turkey (GOT) extended
its moratorium on rice import licenses for another six
months till March 2004. The Turkish Press is suggesting
that importers requested the ban in order to force domestic
prices higher and earn windfall profits. More likely, with
upcoming elections the GOT is looking to increase prices for
domestic rice farmers and circumvent IMF/World Bank
requirements by not providing direct subsidies or increasing
support prices. The GOT as usual failed to provide any
official notice on the moratorium either to foreign
embassies or the WTO. End Summary.
Newspaper Announcement
2. (SBU) On October 1, Turkish newspaper articles reported
that the Ministry of Agriculture and Rural Affairs (MARA)
had extended its moratorium on rice import licenses until
March 2004 - February 1, 2004 for paddy rice and March 1,
2004 for milled rice. This is the first time the moratorium
has been extended to such a late date. For the past three
years, the GOT stopped issuing rice import licenses between
August 1 and October 15 until most of the Turkish rice
harvest had been completed. Turkish importers, however,
knowing the moratorium would be implemented normally
imported larger quantities prior to August in order to
ensure sufficient supplies during the three-month ban. This
year, for example, importers bought approximately 80 TMT of
rice just prior to August.
The Blame Game
3. (SBU) The article criticized importers as being
responsible for the moratorium extension. According to the
article, importers bought large quantities prior to August
and requested the GOT to extend the moratorium. The article
accused importers of seeking windfall profits from the
moratorium. The article claimed that prior to August 2003
Turkish milled rice prices were USD 450 a ton but increased
to USD 580 a ton after the moratorium was implemented. We
contacted two of the largest importers of rice who scoffed
at the accusations noting that prices actually fell during
the first part of August.
Impact on U.S Trade - Minor
4. (SBU) Importers commented that the moratorium on import
licenses would probably have little effect on U.S. rice
exports to Turkey. First, with weather conditions in
California delaying the rice harvest, California rice will
most likely not be available for export until November or
December. Second, tight rice supplies in the United States
will make it difficult to source rice from the United
States. According to the importers, U.S. imported prices
for Calrose rice is approximately $800 - $850 ton.
On Turkey's domestic market, Calrose prices are $700 - $750
per ton.
The Egypt Wild Card
5. (SBU) Importers noted that ban would be more effective
against lower-priced Egyptian rice currently being offered
at USD 250 - USD 320 a ton. Given the tight U.S. market,
more Egyptian rice would be the more likely option to fill
any shortfall. Even if the ban is lifted in early 2004,
importers don't expect much U.S. rice to even be available
for purchase.
Elections Looming
6. (SBU) The more reasonable explanation to the extended
moratorium is domestic politics. With elections on the
horizon, MARA officials are looking to provide some
assistance to local Turkish rice producers. Given the lack
of GOT funds available and IMF/World Bank restrictions on
domestic support programs, the GOT can raise domestic prices
only by restricting supplies and imports. The GOT has used
similar practices in the past to support Turkish wheat
farmers (restricting import licenses) as well as corn, and
edible oil producers (higher duties).
Is the Sky the Limit?
7. (SBU) As a result of the moratorium, experts believe
domestic rice prices will rise as Ramadan approaches.
Officials are counting on a large domestic crop. However,
industry officials who are currently purchasing domestic
rice, contend that the domestic crop will not be as large as
officials hope. As a result, we may see a repeat of 2002
when prices increases so drastically during Ramadan that the
Turkish Grain Board was forced to import rice to reduce
prices. If this should occur again, the GOT may be forced
to lift the moratorium.
Comment: Same Old Same Old
8. (SBU) The extended moratorium on rice import licenses is
most likely driven by domestic politics rather than importer
greed. Prior to elections, the GOT has repeatedly tried to
curry the favor of its agriculture producers and rural
population who represent 40% of the population. Most
agriculture producers expect some form of support from the
government. The GOT has become very creative in
circumventing IFI requirements by increasing prices by
restricting supplies through tariffs or licensing. As is
usual, the moratorium was initially announced by internal
memorandum with no official notification to foreign
embassies or the WTO. Unfortunately, as is the case with
most GOT intervention into the agriculture market, Turkish
consumers will bear the brunt of the added costs and in the
end the GOT may still be forced to import rice at an
inconvenient time if prices increase too much.
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