Cablegate: Turkish Rice Quota Restrains Imports

Published: Tue 1 Mar 2005 09:12 AM
This record is a partial extract of the original cable. The full text of the original cable is not available.
010912Z Mar 05
USDA FOR FAS FOR ITP/Bertsch, Henke, Shwartz, LEIER
E.O. 12958: N/A
SUBJECT: Turkish Rice Quota Restrains Imports
Ref: (A)2004 State 180202 (B)2004 Ankara 005376 (C)2004
Ankara 002686
Sensitive but Unclassified. Not for Internet Distribution.
1. (SBU) Summary. In February 2005, the Turkish government
issued import licenses for rice under its new import regime
announce in August 2004. However, because of the costly
procedure and high tariffs no significant rice has been
imported into the country. Traders estimate that import
demand could be as high as 350,000 tons (milled equivalent)
in CY 2005 however, under the current regime imports will be
less than half that amount. Despite concerns raised by the
USG in Geneva and in Ankara (Ref A), Turkish officials see
no need to change the current procedures and may apply the
same system to other commodities. It is believed that the
GOT will again stop issuing licenses in July 2005. End
High Cost to Importers and Turkish Consumers
2. (SBU) Turkey began imposing an unofficial ban on rice
imports about 4 years ago. Initially, the Ministry of
Agriculture and Rural Affairs (MARA) stopped issuing
licenses during the Turkish harvest (usually for 3 months)
in order to raise domestic prices. However, demand for rice
including imported rice increased. As a result, in 2003,
MARA stopped issuing licenses for close to 2 years. In
2004, MARA issued new regulations. According to these
regulations, anyone wishing to obtain an import license must
purchase a similar amount of domestic rice. In the past,
the GOT purchased domestic wheat at inflated prices in order
to support Turkish farmers. Because of the high prices and
cheaper imports, much of the domestic rice was stored in
government warehouses. With this new system, the private
sector must purchase all the domestically-produced rice
saving the government millions of dollars. Despite a large
harvest, restrictions on imports have forced rice prices
even higher. Producers are enjoying windfall profits,
knowing that importers will be forced to purchase all
domestic rice. However, the financial cost of purchasing
the domestic rice is highly prohibitive even for larger
companies and has resulted in smaller companies being
excluded from the market. Some larger Turkish rice traders
have indicated that they will not purchase any domestic rice
next year, in order to force the government to procure it.
Major Impact on Imports
3. (SBU) According to trade sources, Turkey had between 70
- 130 TMT of rice (milled equivalent) in bonded warehouses
in 2004. The first import licenses issued were used to
release about 70 TMT from these warehouses. One trader
indicated plans to purchase 40 TMT of U.S. rice recently and
expects to make a similar purchase later in the spring.
There have also been some small sales of milled rice
(approximately 4000 tons). However, because of attractive
prices and quality of rice in the United States, traders
believe that imports have the potential to reach 300 - 350
TMT in 2005. However, because of the current quota system
imports will be less than 150 TMT.
4. (SBU) Turkish officials continue to claim that the quota
does not discriminate against U.S. suppliers and that high
freight costs are the only reason, the United States is
having a difficult time in the Turkish market. The price for
U.S. rice imported to Turkey currently averages about USD
500/ton (paddy rice) - USD 825/ton for milled rice. This
includes a USD 120/ton tariff for paddy rice and USD 175/ton
tariff for milled rice. The price for domestic rice can
reach $750/ton. However, the availability of import
licenses is as much of a problem as prices. Most companies
simply do not have the financial means to purchase domestic
rice in order to receive an import license. The new import
regime, as a result, has limited the number of firms, which
can import and in the end the amount of imported rice.
Constraining Trade
5. (SBU) Between 1995 and 2003, U.S. rice exports alone to
Turkey averaged over 150 TMT a year. This included several
years where exports were over 200 TMT a year. In 2004, U.S.
exports dropped to 58 TMT, with most of this held in bonded
warehouses or as transshipments to Iraq. Nevertheless, the
Turkish import regime has accomplished what it set out to
do, constrain trade and force domestic prices higher.
Comment: More to Come?
6. (SBU) In response to concerns that the import regime is
constraining trade, GOT officials adamantly maintain that
high freight prices are the real reason U.S. export have
decreased this year and so far, have been unmoved by any
arguments from Post or Washington. Turkish officials and
private traders have indicated that the government will
again stop issuing import licenses beginning in July 2005
just at the new domestic crop is being harvested. Moreover,
Turkish officials like the program so much that they plan to
apply the same procedures to other commodities like corn,
wheat and soy. This could have a major impact on U.S. sales
of products to Turkey.
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