Louis Dreyfus Commodities Moves Closer to Large

UNCLAS BAGHDAD 003307 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EAGR ETRD ETRN BEXP IZ SUBJECT: Louis Dreyfus Commodities Moves Closer to Large Agricultural Discharge and Processing Investment in Umm Qasr 1.(SBU) Summary and Comment: In a recent meeting with Agricultural Counselor, Louis Dreyfus Commodities' (LDC) Iraqi-French representative Dr. Khazal Abbas dusted off previously established plans for the construction in Umm Qasr of a USD 400 million multi-commodity discharge, storage and Qsing facility. LDC is prepared to begin its investment once they have acquired/leased approximately 125 acres in Umm Qasr. There is one potential area at Umm Qasr port which may be suitable and LDC is looking to engage with the Ministry of Transportation on developing this site or other potential parcels. For Iraqi consumers, the benefits of this project would be greater availability of agricultural commodities at lower prices. End Summary and Comment. The French Grain Multinational Intends to Establish Deep Roots ¶2. (SBU) In a meeting with Embassy representatives on December 13, LDC's Abbas indicated the company, among the world's largest grain-trading multinationals, concluded that the time is ripe to proceed with this initiative. LDC's pursuit of this project began in early 2007, and they now seek a long-term port space lease for aQed investment in a 275 million euro ($400M) vegetable oil refinery, sugar refinery and grain terminal/flour milling operation in the Port of Umm Qasr. ¶3. (SBU) Abbas informed us that LDC is ready to move ahead; they have preliminary approval from the office of the Prime Minister, and the Ministry of Trade, and now need to engage the Ministry of Transportation. LDC will require a 125 acre site suitable for unloading Panamax-sized (50,000MT) cargoes. Once the issue of space is finalized, they intend to construct in three phases: 1. a vegetable oil refining facility (300TMT/yr.) which will take two years to complete; 2. A sugar refining facility (500TMT/yr.); and, ¶3. a grain terminal (200TMT/storage) and flour mill (450TMT/yr.) A rail link was discussed and is preferred, but Embassy representatives explained that no grain currently is conveyed by rail northward from Basra owing to the lack of railcars. Prescient Planning Should Position LDC for a Market Primed to Consume ¶4. (SBU) With a market of close to 30 million and an economy poised to expand and subsequently provide for more consumer spending, LDC recognizes the market potential for a number of commodities in which they deal, but do not currently supply to Iraq, including sugar and vegetable oils. At least for the next few years, LDC is counting heavily on supplying commodities including wheat, sugar and vegetable oil to the State Company for Foodstuffs for Iraq's public ration system and believe that they will enjoy a competitive advantage over competitors by having dedicated port and processing facilities located in Iraq. LDC is also anticipating the subsequent marketing of branded products produced at these facilities. The flour milling operation is an addition to the original plan as conceived. LDC has no plans for an oilseed crushing facility at this time. This had been suggested last year in preliminary discussions as a possibility that would address the need for protein meal (livestock feed) by poultry/livestock producers. Abbas further suggested that the company's thinking was that they could recoup their direct investment outlay in three years time from the date of completion. ¶5. (SBU) Comment: While no other multinational grain operators have a presence in Umm Qasr, LDC's plans for significant processing and follow-on marketing in Iraq represent a considerable break from Qand follow-on marketing in Iraq represent a considerable break from the "discharge and go" approach that has characterized commodity exports to this market. Although there are still a myriad of details to be ironed out, Dreyfus's plans are timed to capitalize on what will hopefully be an Iraqi investment and business climate more conducive to outside participation. End Comment. FORD