BURMA: CYCLONE DESTROYS RICE CROPS, PRICES

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000331

SIPDIS

STATE FOR EAP/MLS, S/ES-O-CMS, DS/CC AND DS/IP/EAP
INR/EAP
DEPT PASS TO USDA
DEPT PASS TO USAID/OFDA
PACOM FOR FPA
TREASURY FOR OASIA, OFAC

E.O. 12958: DECL: 05/07/2018
TAGS: EAGR ECON EFIN PREL PGOV BM
SUBJECT: BURMA: CYCLONE DESTROYS RICE CROPS, PRICES
INCREASING

REF: A. RANGOON 327


B. RANGOON 323

C. RANGOON 285

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Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4
(b and d)


1. (C) Summary. Cyclone Nargis ripped through the Irrawaddy
Delta on May 2, destroying both the newly-planted summer rice
crops and the drop season crop awaiting harvest. Before the
storm, Irrawaddy Division was one of Burma's main rice
producing areas. The townships hardest hit by the storm -
Pyapone, Bogalay, Labutta, and Kyaiklat - produced most of
the rice sold in Rangoon. With these crops destroyed, rice
millers predict that little to no rice will enter into
Rangoon's markets, causing significant shortages and further
driving up prices. Areas with rice surpluses - Pathein,
Shwebo, and Mandalay - do not plan to ship the rice to
Rangoon, as high transportation prices would cut into any
profits. The GOB denies it has any stocks of rice, although
sources confirm MEC and MEHL have an estimated 50,000 metric
tons plus additional army rice reserves. Rice millers
predict that the regime will not make this rice available to
the needy. Traders confirm that Aye Yar Shwe Wa Company,
owned by Aung Thet Mann and Tay Za, plans to export 50,000
metric tons of rice to Sri Lanka as soon as the port reopens.
End Summary.

Little Rice in the Irrawaddy
--------------


2. (C) Cyclone Nargis devastated the Irrawaddy Division, one
of Burma's largest rice producing areas, destroying villages,
towns, and agricultural fields with its 120-miles per hour
winds. Myo Thura Aye, owner of Shwe Thein Rice, Paddy, and
Agricultural Products Trading Company, told us that the four
main rice producing townships in Irrawaddy - Labutta,
Kyaiklat, Pyapone, and Bogalay - were flooded by the storm;
entire villages were swept away, people lost their families,
and farmers lost both their newly-planted summer rice crops
and the dry season crops awaiting harvest. Most people in
the Irrawaddy Delta had little prior knowledge about the
storm and thus did not make any storm preparations, he
informed us. Several farmers in Chaila (Southern Irrawaddy
Division) learned of the coming storm, extracted rice paddy,
and sold it for below market prices to a rice miller so to
not lose everything. This situation worked out better for
those farmers, he noted, as the rice miller's factory and
storage sheds were completely destroyed.


3. (C) The Ministry of Agriculture has yet to collect data
on how much damage the storm inflicted on the Irrawaddy rice
crops. One Ministry of Agriculture official told us that the
Ministry would collect this data only after it assessed how
much damage was done to government-owned buildings. Several
Ministry of Agriculture officials acknowledged that the
destruction of rice crops and rice seeds for next year's
plantings could lead to dramatic food shortages and increased
prices in Rangoon, which receives most of its rice from the
Irrawaddy Division.

Prices Increasing Daily
--------------


4. (C) Myo Thura Aye denounced GOB claims that it has no

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stocks of rice, noting that the Myanmar Economic Cooperation
(MEC) and Myanmar Economic Holdings Limited (MEHL) are
holding on to 50,000 metric tons of rice (Ref A) and that the
military has unknown reserves for the army. Instead of
donating that rice to Burma's needy, the regime has requested
that private rice traders, who have their own stocks of rice,
donate their stocks instead. The government also ordered
rice traders to keep the market price of rice low, which has
not happened (Ref B). As of May 6, one bag of ehmata rice
(25 percent broken rice) sold for 35,000 kyat ($32.00) a bag
(69 lbs),up from 24,000 kyat ($22.00) one week ago - a 46
percent increase. Prices continue to rise in the market, as
available stocks of rice dwindle down. Rice traders confirm
that almost all of the superior quality rice in Rangoon has
been sold, at an average of 50,000 kyats ($46.00) a bag.
Vendors are quickly selling out of ehmata and inferior rice,
and many of Rangoon's larger markets have no stocks of rice.


5. (C) The rice millers and traders, who are currently
setting the market rice prices, are benefiting from the rice
gouging, Myo Thura Aye told us. However, not all of the
traders are out to make a profit, and several large companies
have followed the GOB's request to sell rice at low,
reasonable prices. However, there is not enough rice in
Rangoon to meet the increasing demand, and rice traders have
begun to worry about looting and rioting, he said. Many rice
shops in Rangoon remain closed, either because they did not
have rice to sell or because they were afraid of being mobbed
by hordes of hungry Burmese.


6. (C) Prior to the storm, there were excess rice stocks in
several States and Divisions in Burma, including Sagaing
Division and parts of Rakhine State. It is unlikely that
these surplus stocks will come to Rangoon, Myo Thura Aye
believed, noting that high transportation costs would cut
into any profits. Additionally, traders in Mandalay and
Shwebo have been able to sell their rice at extraordinarily
high prices. Thus, there is no financial incentive to move
rice down to Rangoon, he concluded. Other areas with surplus
rice, such as Pathein (which was not hit by the storm),are
keeping it for future local consumption.

Still Planning to Export?
--------------


7. (C) It is not clear what MEC and MEHL plan to do with
their 50,000 metric tons of rice, although several rice
traders predicted that they may try to export the rice when
the port reopens. Aye Yar Shwe Wa Trading Company, owned by
Aung Thet Mann and Tay Za, still plan to export the 50,000
metric tons promised to Sri Lanka (Ref C),Jaffer Hussain,
owner of Universal Trading Company, informed us. Aye Yar
Shwe Wa's warehouse at the port sustained only minimal damage
and rice stocks were not damaged, he said. Myo Thura Aye
indicated that the regime will continue its rice export
plans. The Rice Miller Association is currently assessing
the damage to its warehouse at Thilawa Port; the association
had planned on exporting 1,848 metric tons of rice in May.
Myo Thura Aye said that while some of this rice was damaged
by rain, the Rice Miller Association still planned to export
what it could.

Comment
--------------


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8. (C) Food shortages are apparent throughout Rangoon, with
rice, cooking oil, and water in the highest demand. As the
government restores supply lines and train service, shipments
of fruits and vegetables from Northern Burma should make
their way into Burma, alleviating some of the demand for
food. However, rice is Burma's primary staple and the
majority of Burmese eat rice with every meal. As rice stocks
continue to dwindle, and internally displaced peoples from
Irrawaddy Division make their way into Rangoon, there will be
increased competition for what little rice is available.


9. (C) That the regime would proceed with rice exports to
line their own pockets at this time offers further evidence
that they have not grasped the full extent of the damage
caused by Cyclone Nargis. It also helps to explain why they
do not feel much need to open up to international
humanitarian assistance.

VILLAROSA