Sudan's Strategic Commodity Reserve Authority

UNCLAS SECTION 01 OF 02 KHARTOUM 001062

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E.O. 12958: N/A
TAGS: EAID PREF PGOV PHUM SOCI KAWC SU
SUBJECT: Sudan's Strategic Commodity Reserve Authority

Ref: Khartoum 0939

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Summary and Comment
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1. On April 19, 2006, a USAID food security
representative met with Badawi El Khair, Director General
of Sudan's Strategic Commodity Reserve Authority (SCRA),
and Ahmed Mardas, head of the SCRA marketing section, to
discuss the agency's ongoing efforts to maintain food
security in Sudan. The SCRA, which was established in
late 2000, is a Government of National Unity (GNU)
mechanism to stabilize grain prices over the annual
agricultural production cycle by maintaining a national
cereal reserve in order to implement a floor price policy
of market intervention.


2. In 2005, the SCRA claims to have distributed 270,000
metric tons (MT) of grain throughout Sudan. (Note:
USAID food security analyst can neither confirm nor deny
the accuracy of this claim. End note.) The SCRA does
not currently coordinate its grain distribution
operations with donors, the U.N. World Food Program
(WFP),or international non-governmental organizations
(NGOs) providing food assistance in Sudan. The
international humanitarian community should open a
dialogue with the SCRA to gain visibility on SCRA's
regional food distributions in order to improve food
security for the people of Sudan. End summary and
comment.

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SCRA Grain Purchases
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3. The role of the Strategic Grain Reserve is to serve
as a price stabilization mechanism for the country. Each
year the reserve enters the marketplace and buys sorghum
after the harvest. The sorghum is then held and released
into selected markets, or even distributed at times for
free, at the discretion of the government. The
international community consistently has questioned why
this mechanism is not used for to fill gaps in
international food aid pipelines or contribute to
humanitarian programs in Sudan.


4. This year, the SCRA plans to procure 500,000 metric
tons (MT) of sorghum at a floor price of Sudanese Dinars
(SD) 5,000 per 90 kilogram (kg) sack for a total cost of
SD 25 billion, or USD 11 million. Of the 500,000 MT
total, SCRA will purchase only 150,000 MT of sorghum
directly from producers. SCRA will buy the remaining
350,000 MT of sorghum through a consortium of banks
(150,000 MT) and private investors (200,000 MT) who will
each retain a margin of profit from their grain sales to
the strategic grain reserve.


5. According to an SCRA official, the office recently
received funding from the GNU Ministry of Finance and has
deployed purchasing teams to six of Sudan's large
mechanized farming areas to begin the procurement
process: Gedarif, Ed Damazine, Sennar, Habila in
Southern Kordofan State, Er Renk in Upper Nile State, and
Kosti. SCRA officials have clearly stated that they
cannot afford to buy sorghum at a price above SD 5,000
per 90 kg sack. Though recent grain prices in Sudan have
fluctuated from SD 4,600 to SD 5,100, SCRA is expecting
sorghum prices to decline as a result of decreasing
demand created by the culling of birds in response to
Sudan's recent outbreak of avian influenza. Sorghum is
used as an ingredient of chicken feed by many large
producers.

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Use of Strategic Reserve in Humanitarian Crisis Areas
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6. Darfur: According to the SCRA, Darfur currently has
the lowest cereal prices in Sudan due to local
humanitarian aid distributions by the international

KHARTOUM 00001062 002 OF 002


community. The average price of a 90 kg sack of sorghum
in Darfur is SD 4,000, 20 percent lower than the country-
wide average of SD 5,000. Given these low prices, it is
unlikely that the SCRA will distribute food in Darfur.


7. Kassala and Red Sea States: Each month, the SCRA
contributes 1,800 MT of sorghum to Kassala State and
2,250 MT to Red Sea State. In March, as the hunger
season advanced, SCRA contributed 6,840 MT to Kassala
State and 9,000 MT to Red Sea State, according to the
SCRA official. It is unclear how this food is actually
distributed. When a USAID team visited Kassala from
April 20 to 23 (septel),local humanitarian workers said
that SCRA food distributions are often used as a
political, rather than a humanitarian, tool. WFP's food
distribution system in eastern Sudan targets over 190,000
people with 17,000 MT of food.

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Commentary
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8. Constraints/Limitations: SCRA's ability to moderate
grain floor prices across Sudan is limited by low state
government capacity to fund and coordinate the regional
distribution of food, (and by interference of politics in
the destination and use of the food). Under current SCRA
policy guidelines, state governments are responsible for
transporting grain reserves from SCRA's storage
warehouses to their local market. Since many of Sudan's
state governments lack fiscal resources, this policy
often delays the shipment of food commodities to their
intended destination. In some cases, food commodities
have been monetized to pay for transportation costs, thus
reducing the quantity of food available to local
beneficiaries.


9. Potential for Collaboration: The establishment of a
transparent information-sharing network between SCRA and
the international humanitarian community has the
potential to facilitate market surveillance and improve
efficiency of food assistance activities throughout
Sudan. To date, SCRA's operations have not been
disclosed to the international community. Thus, SCRA
food distributions do not enter into discussions
surrounding food assistance operations in Sudan. Given
its poor reputation for controlling and limiting NGO
activities in Sudan, the Humanitarian Aid Commission
(HAC) surprisingly employs several technical experts who
could be encouraged to assist in building these linkages.
Given WFP's impending ration cuts which will likely
result in rising food prices in areas like Darfur, the
role of the SCRA in stabilizing market prices becomes
more important. Opening a dialogue with SCRA,
potentially through technical experts working for the
HAC, might be one way to move this dialogue forward.

STEINFELD