VZCZCXRO4586
RR RUEHTRO
DE RUEHAS #0493/01 1240548
ZNR UUUUU ZZH
R 030548Z MAY 08
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC 5720
INFO RUEHFR/AMEMBASSY PARIS 2700
RUEHRB/AMEMBASSY RABAT 2324
RUEHTU/AMEMBASSY TUNIS 7179
RUEHTRO/AMEMBASSY TRIPOLI
RUEHNK/AMEMBASSY NOUAKCHOTT 6355
RUEHNM/AMEMBASSY NIAMEY 1583
RUEHBP/AMEMBASSY BAMAKO 0536
RUEHCL/AMCONSUL CASABLANCA 3392
RUEHEG/AMEMBASSY CAIRO 1029
RUEHRC/USDA FAS WASHDC 0232
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS SECTION 01 OF 02 ALGIERS 000493 
 
SENSITIVE 
SIPDIS 
 
RABAT PASS TO USDA MFAY 
CASABLANCA PASS TO USCS RORTIZ 
CAIRO PASS TO TREAS ASEVERENS 
 
E.O. 12958: N/A 
TAGS: EAGR EAIDETRD ECON PGOV PREL AG
 
SUBJECT:  IMPACT OF RISING FOOD PRICES: ALGERIA 
 
REF:  STATE 39410, ALGIERS 3 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1.  (SBU)  SUMMARY:  Algeria imports much of the food in consumes, 
up to 50 percent of some commodities, and the prices of many food 
items are climbing significantly.  The government is using subsidies 
to prevent price increases for a few food staples, like bread, 
semolina and milk.   Because of this effort, the population has been 
insulated from the full shock of commodity price increases (ref b), 
but consumers are definitely feeling a pinch due to non-subsidized 
food items' rising prices.  Higher food prices have not had an 
impact on USG programs in Algeria.  The Algerian government 
currently spends nearly 10 percent of its annual budget on food 
subsidies, and has adjusted and expanded its price supports systems 
as a result of the ongoing, worldwide rise in commodity prices. 
Algeria has the resources through hydrocarbon revenues to continue 
price supports in an effort to keep foodstuffs affordable to all 
Algerians.  Algeria exports no significant volumes of food 
commodities, and has no real biofuels effort.  Environmentally, 
rising food prices may result in a resurgence of crop production in 
Algeria's long-stagnant agricultural sector, but deforestation and 
water reallocation would likely be minimal because open farmland is 
underutilized today, and the government is building several seawater 
desalination plants for urban water needs.  We expect little or no 
impact on USG programming in Algeria because of world food prices, 
and recommend a focused bilateral effort to streamline dairy and 
meat import certifications.  END SUMMARY. 
 
DEMAND 
------ 
 
¶2.  (SBU)  The most important food commodities consumed in Algeria 
are wheat products, particularly for bread, couscous, pasta and 
other semolina varieties, vegetable oil, milk and potatoes.  Algeria 
is a net importer of its commodities staples: 50 percent of cereals 
are imported, 40 percent of dairy products, and nearly 100 percent 
of crude vegetable oil.  Bulk products are imported, such as dry 
milk powder and crude vegetable oil, and processed domestically into 
consumer products such as boxed milk, yogurts, and refined vegetable 
oil.  Some refined products are then packaged for export, such as 
vegetable oil and pasta, largely to west and central Africa, and to 
southern European markets. Recent press reports indicate that 
average consumer prices of other foodstuffs have increased 10 
percent in recent months, and Algerians complain that they are 
feeling a tighter pinch.  We note little change in consumption 
patterns, again because the government has taken steps to ensure the 
availability and general price control on staples, but we hear 
anecdotally that Algerians are consuming less meat because of the 
rising price of beef. 
 
SUPPLY AND GOVERNMENTAL POLICIES 
-------------------------------- 
 
¶3.  (SBU).  Supply of agricultural commodities remains generally 
stable.  While Algeria remains a net importer of commodities, the 
government undertook an agricultural revitalization plan in 2000 to 
enhance regional comparative advantages across Algeria's 
agricultural zone, and that process continues, albeit slowly.  The 
government recently changed the wheat price support system so that 
the national wheat board (OAIC) would pay Algerian producers an 
quote internationally competitive unquote price for their wheat and 
then resell it to millers at subsidized prices to support the retail 
price caps on items such as bread and flour.  Higher government farm 
prices may encourage increased acreage devoted to wheat production 
in addition to its primary function of providing price 
stabilization, and the government announced in mid-April that 
Algeria's wheat stocks were currently sufficient, obviating the need 
for further imports for the next several months.  The government is 
preventing price increases for a few staples, such as bread, 
semolina and milk.  The government is expanding its system of price 
supports and consumer price controls beyond bread, semolina and milk 
to include flour, with vegetable oil soon joining them. 
 
¶4.  (U)  Because Algeria's agriculture sector has been declining for 
 
ALGIERS 00000493  002 OF 002 
 
 
many years, there are no shortages of storage capacity or other 
bottlenecks in the supply chain.  Algeria is researching the 
potential use of agricultural byproducts for biofuels, but there is 
no current effort to convert commodities to fuels.  Rainfall remains 
a significant factor in domestic production, with drought conditions 
hampering production in some areas in recent years, but rainfall 
levels improved across a wide swath of Algeria during the winter of 
2007-08, and should help 2008 production levels. 
 
POLITICAL, ECONOMIC, AND ENVIRONMENTAL IMPACTS 
--------------------------------------------- - 
 
¶5.  (SBU).  There have been no recent protests specifically over 
food prices, but in some areas of Algeria we have seen reports of 
sometimes violent clashes between police and demonstrators who were 
protesting an overall economic malaise; lack of jobs, opportunities, 
housing and rising cost of living.  Presidential elections are 
scheduled for 2009, and we anticipate that the government will have 
both the financial means (through hydrocarbons revenues) and the 
political will to maintain consumer prices through heavy subsidies 
and head off such protests.  There should be little impact 
environmentally in terms of deforestation or water reallocation 
because much Algerian farmland remains underutilized and the 
government has undertaken large, urban seawater desalination 
programs. 
 
 
COMMENT: LITTLE IMPACT ON USG PROGRAMS OR POLICY 
--------------------------------------------- --- 
 
¶6.  (SBU)  Rising food costs have had no impact thus far on Post 
programming, and we do not anticipate any impact in the near to mid 
term.  We have been working to make the certification processes 
easier and faster for the importation of dairy products and for meat 
products.  Such efforts have proven successful regarding import of 
day-old turkey chicks.  We recommend improving these particular 
certification processes in order to allow for more American sales to 
Algeria, but also to afford Algeria more, faster and cheaper 
alternatives to European food products.  As long as the price of oil 
remains high, Algeria should be able to continue its system of price 
supports and consumer price controls.  We do not expect any 
significant balance of trade problems specifically linked to world 
food prices under current conditions.  However, should world stocks 
or shipping availability reduce Algeria's capacity to import 
products on time, food supply protests are possible. 
 
¶7.  (U)  This cable was coordinated and cleared by USDA FAS Rabat. 
 
FORD