BURMA: CYCLONE DRIVING UP FOOD AND FUEL PRICES

UNCLAS SECTION 01 OF 03 RANGOON 000323 SENSITIVE SIPDIS STATE FOR EAP/MLS, EEB/TPP/ABT/ATP - JANET SPECK BANGKOK FOR USDA/FAS, ECON OFFICE, USAID DEPT PLEASE PASS TO USAID - CHERYL JENNINGS PACOM FOR FPA TREASURY FOR OASIA:SCHUN E.O. 12958:N/A TAGS: EAGR EAID ETRD ECON PGOV PREL BM SUBJECT: BURMA: CYCLONE DRIVING UP FOOD AND FUEL PRICES Ref: Rangoon 310 RANGOON 00000323 001.2 OF 003 ¶1. (SBU) Summary. Cyclone Nargis devastated parts of southern Burma, including Rangoon and the Irrawaddy Delta. Trees and power lines are down, many homes are inhabitable, potable water supplies have been compromised or destroyed, and roads are blocked with debris. In the aftermath of the storm, prices of food and fuel skyrocketed due to increased demand and limited supply. While government prices of gasoline and diesel remain the same at 2,500 kyats ($2.30) and 3,000 kyats ($2.70) a gallon respectively, black market prices have increased by more than 50 percent. Food supplies in Rangoon are limited, and prices of edible oil and rice increased by 45 percent and 25 percent respectively. Market stalls and supermarket shelves are quickly becoming bare, as the Burmese run out to purchase as many commodities as they can afford. As long as roads into Rangoon remain blocked and black market fuel prices continue to skyrocket, prices of food and commodities will continue to rise, leaving many Burmese in Rangoon unable to put food on the table. End Summary. Soaring Prices and Runs on Stores -------------- ¶2. (SBU) Cyclone Nargis hit Burma on May 2 and 3, severely affecting Irrawaddy Division, Rangoon Division, Bago Division, Mon State, and Karen State. With 120 mile per hour winds when it reached Rangoon, Cyclone Nargis leveled many villages and homes, tore down trees and power lines, and devastated potable water supplies (Reftel). Rangoon was hit hard; because of the downed power lines, many now depend on generators for electricity. Prices of fuel, including gasoline and diesel, jumped dramatically in the wake of the storm. The GOB sets prices for gasoline and diesel at 2,500 kyats ($2.30) and 3,000 kyats ($2.70) a gallon respectively, but limits the amount that one can purchase at one time. As result, there is a thriving black market for fuel. Before the storm, the black market price of gasoline was 5,200 kyat ($4.70) a gallon and diesel cost 5,800 kyat ($5.20) a gallon. As of May 4, gasoline prices jumped 54 percent to 8,000 kyat ($7.20) per gallon, while diesel prices increased 72 percent to 10,000 kyat ($9.00) a gallon. The fuel price increases immediately led to a dramatic jump in transportation prices, with the cost of taxis, buses, and trucks for shipment increasing up to 400 percent. Since many of the taxis and buses are fueled by compressed natural gas, the supply of which has been cut off, there are significantly fewer on the roads, which further drives up prices. ¶3. (SBU) Many Burmese were unaware of Cyclone Nargis before it hit, and thus were unprepared for the storm. Others believed that the cyclone would just be a regular rainstorm and did not stock up on basic commodities. Immediately after the storm, we observed many people, both Burmese and foreigners, rushing to the markets and supermarkets to purchase large supplies of food, particularly rice, fruits, vegetables and cooking oil, and drinking water. Vendors took advantage of the high demand, dramatically raising prices of basic food supplies. According to Win Win Tint, General Manager of City Mart, the most in-demand items are rice, cooking oil, and potable water. Prices of these goods increased dramatically: ehmata rice (25 percent broken rice, medium quality eaten by most Burmese) prices rose from 24,000 kyat ($21.80) per bag (69 lbs) to 30,000 kyat ($27.27) per bag, soybean oil prices increased by 45 percent, from 4,500 kyat ($4.00)/2 liters to 6,500 kyat ($5.90)/2 liters, and drinking water prices increased 233 percent, from 300 kyat ($0.27)/liter to 1,000 kyat ($0.90)/liter. By May 5, many stores' and market's shelves were bare, and vendors were unable to predict when they could replenish their stocks, as the blocked roads limited the transportation of goods throughout the city. RANGOON 00000323 002.2 OF 003 -------------- -------------- Selected Commodity Prices, Rangoon As of May 5, 2008 In Kyat -------------- -------------- Good Pre-Storm Post-Storm Percent Price Price Increase -------------- -------------- Ehmata Rice 24000/bag 30000/bag 25 Peanut Oil 4500/viss 5000/viss 11 Soybean Oil 4500/viss 6500/viss 45 Palm Oil 3200/viss 4000/viss 25 Pork 6000/viss 8000/viss 33 Chicken 6000/viss 8000/viss 33 Duck Eggs 100/each 250/each 150 Chicken Eggs 120/each 300/each 150 Purified Water 300/liter 1000/liter 233 -------------- -------------- *1 viss=3.6 lbs or 1 viss=2 liters ¶4. (SBU) While many vendors admit that food prices are unusually high because of the storm, they predict that prices will fall (but not return to normal) in several days. Once the roads are open, people will be able to deliver food to Rangoon, increasing the supply of basic food commodities on the market and thus marginally lowering prices. Additionally, Chris Kaye of World Food Program told us that the Rangoon Regional Commander, who is in charge of monitoring food prices in Rangoon Division, is closely monitoring the situation and will take steps to keep prices from skyrocketing out of control. However, as long as fuel prices and transportation costs remain high, we expect that the prices of food and agricultural commodities will remain higher than pre-storm levels. ¶5. (SBU) As supermarkets in Rangoon run out of basic supplies or face the lack of electricity, they are closing their doors. City Mart, which has eight stores throughout the city, only opened five of them on May 5. The Dagon Center, one of Rangoon's largest shopping malls, was also closed. The supermarket in Sein Gyi Ha Mall in downtown Rangoon was open, despite lack of electricity. The manager told us that the supermarket was trying to sell its perishable goods, such as meat and dairy products, before they went bad, although it did not lower prices on these products. He admitted that if he could not sell them, he would likely put them back in the refrigerator (which is not operational due to lack of electricity) and would try to sell them tomorrow. As the power shortage continues and there is lack of potable water, the quality of the food sold in Rangoon and other parts of Burma will diminish, which could lead to disease and other ailments when people consume them. Comment -------------- ¶6. (SBU) Much of Rangoon's food supply is brought in from other areas of Burma, and rising fuel and transportation costs will continue to affect prices. As long as the roads into Rangoon remain blocked by fallen trees or power lines, food supplies will remain limited, shelves will be bare, and prices will remain high. So far, the Burmese are dealing with the price gouging, and we have seen limited looting around the city. However, the Burmese are angry that the regime is not doing more to help them. The longer it takes for the government to repair the power lines, remove the trees, and restore supply lines, the more likely increasing desperation could result in violence, looting, and political unrest. RANGOON 00000323 003.2 OF 003 VILLAROSA