INDONESIANS REQUEST US HELP TO CALM RICE MARKETS

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FROM AMBASSADOR HUME TO U/S JEFFERY

E.O. 12598: N/A
TAGS: EFIN EAGR ECON ETRD PGOV ID
SUBJECT: INDONESIANS REQUEST US HELP TO CALM RICE MARKETS



1. (SBU) Summary. This is an action request. Indonesian Trade
Minister Mari Pangestu has requested that the U.S Government seek to
persuade Japan and China to release rice stocks in an effort to calm
world rice markets. Rice prices in Asia have tripled in the past
four months, despite ample stocks. Indonesian officials expect the
country will need to import rice later this year. I would request
that Under Secretary Jeffery contact Japanese and Chinese
counterparts this week to support Minister Pangestu's request.

Trade Minister Seeks US Assistance
--------------


2. (SBU) Indonesian Trade Minister Mari Pangestu has requested U.S.
assistance in persuading Japan and China to release rice stocks in
an effort to calm world rice markets. She expects that Indonesia
will need to import rice during the third or fourth quarter this
year, despite signs that the 2008 harvest will exceed last year's
level. If current trends continue, Indonesia is likely to face rice
prices three to four times higher than last year. Minister Pangestu
noted that market failures, in the form of export restrictions
primarily by India and Vietnam and panic buying from the
Philippines, are the primary causes of recent price increases.
Although rice prices have tripled in the past four months in Asia,
the region as a whole is in rice surplus. The equilibrium price of
rice in Asia should be around $600 per metric ton, or half the
current level, according to the Minister.


3. (SBU) In the Minister's view, China and Japan hold the key to
calming markets in the short term and countering the perception that
the region is facing a rice shortage. Experts estimate that the
current rice shortfall in international markets is roughly 4 million
metric tons. China holds 37 million metric tons of rice in storage,
equivalent to 3 months of consumption needs, according to Pangestu.
Most other nations hold one month of consumption needs for emergency
purposes. Japan holds an additional 1.5 million metric tons of rice
in storage that it has imported from California. Minister Pangestu
believes the Japanese government will hesitate to release these
stocks without the tacit consent of the United States, given
long-standing U.S. efforts to open the Japanese rice market.


4. (SBU) Minister Pangestu is meeting with her ASEAN counter-parts
this weekend in Bali, where they will discuss the rice price issue
in detail. Ambassador Susan Schwab will meet with Minister Pangestu
on the margins of the ASEAN meetings on Friday, May 2. I hope you
can be in touch with your Japanese and Chinese counterparts in time
for Ambassador Schwab to be able to provide feedback to Minister
Pangestu on her request.

HUME