VZCZCXRO2987
RR RUEHMA RUEHPA
DE RUEHMV #0325/01 1221101
ZNR UUUUU ZZH
R 011101Z MAY 08
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 9957
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 04 MONROVIA 000325 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
EEB/TPP/ABT/ATP JANET SPECK 
USDA FAS OFFICE OF GLOBAL ANALYSIS AND FOR FAS/RON VERDONK 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ETRD EFIN PGOV PREL ECON LI
SUBJECT: LIBERIA: IMPACT OF RISING FOOD/AGRICULTURAL 
COMMODITY PRICES 
 
REF: A. A)SECSTATE 39410 
     ¶B. C) 07 MONROVIA 1070 
 
¶1.  (SBU) Summary: Over 60% of Liberians are estimated to 
live below the poverty line and price increases hit hard. 
Liberia is heavily reliant on imported food, of which rice is 
the most important.  Imported rice supplies over half of 
domestic consumption and prices at the retail level are up as 
much as 50% in the past year.  President Sirleaf has 
announced GOL initiatives to mitigate the price increases, 
but told Liberians the higher prices are likely to last a 
while and they should "return to the land."  There are 
sufficient rice stocks to supply the market through August. 
 
¶2.  (SBU) Post programs should continue to focus on 
supporting the GOL's poverty reduction initiatives, boosting 
incomes, rebuilding infrastructure and encouraging 
agriculture.  In addition to steps already taken or proposed 
by the GOL, relaxation of monopolistic import and 
distribution systems for sensitive items could increase 
availability.  (Note:  Reliable data on production, supply, 
and demand are not available.  Much of the information in 
this report is based on local industry estimates, recent 
surveys, or anecdotal reports.  All amounts are in U.S. 
dollars unless otherwise indicated. End note.)  A list of 
prices for comparison purposes is at paragraph 19.  End 
Summary 
 
DEMAND:  Rice is what counts 
---------------------------- 
 
¶3.  (U) Liberia imports most major food commodities, 
including rice, the staple food.  The primary alternative is 
cassava, most of which is locally grown or imported from 
neighboring countries.  Fifty eight percent of domestically 
consumed rice is imported, rising to 92% imported rice in 
urban households.  USDA reports that rice imports come to 
160,000 metric tons annually (mostly from Asia).  The retail 
price of a 50 kg bag of the most popular variety of rice rose 
from $25-30 to $30-35 in the past two months.  The price has 
increased 13% at the wholesale level over the past year, but 
up to 50% at the retail level, according to monitoring by the 
World Food Program and Embassy staff.  (Note: The official 
ceiling on rice prices, set by the Ministry of Commerce, is 
$26-28 per bag. End note.) 
 
¶4.  (SBU) Even before the food price increases, hunger was 
prevalent in Liberia.  The FAO/WFP Crop and Food Security 
Assessment carried out in early 2006 found 81% of the 
population either highly or moderately vulnerable to food 
insecurity.  According to the Core Welfare Indicator 
Questionnaire (CWIQ) conducted in 2007, almost 64% of 
Liberians, an estimated 1.7 million, live below the poverty 
line.  The World Bank notes that a 20% increase in the price 
of rice correlates with a 3-4% increase in the share of the 
population in poverty.  The amount spent on rice imports has 
surged over the past two years, rising from $17 million in 
2005 to $65 million in 2007, according to Central Bank 
figures.  By value, total imports of food, animals and 
vegetable oil almost doubled over the same period, from $71 
million to $130 million.  For example, USDA reports the 
wholesale price of powdered milk has doubled to $4,000 per 
ton.  With a majority of Liberians living below the poverty 
line, the perceived dependence on rice cre 
ates pressure on food security and on the government. 
 
¶5.  (SBU) The GOL is feeling the pressure.  President 
Sirleaf, in an April 14 radio address, described initiatives 
to tackle the price increases, but explained that rising 
prices are an international trend, due in part to demand from 
larger countries and diversion of traditional food products 
to biofuel.  She made several concrete concessions, 
announcing removal of the $2/bag tax on rice.  She also 
referred to plans for a Chinese agricultural team to start 
training in production of large-scale mechanized rice 
production and announced that the GOL is studying the 
possibility of offering public land to those who are willing 
to go to their communities and engage in farming.  That said, 
Liberia has food, and can grow more, but it is poorly 
distributed. Agricultural markets have been distorted and 
farmers do not have incentives to produce beyond the 
subsistence level. 
 
¶6.  (U) Noting that "the increase in food prices will be with 
us for a long time to come," President Sirleaf called on 
Liberians to grow rice, cassava and plantains.  Her urging, 
and her example of growing rice at her own home, have not 
 
MONROVIA 00000325  002 OF 004 
 
 
seemed to persuade Monrovians.  The high prices should 
support GOL efforts for Liberians to return to the land, 
start farming, and reduce dependence on imported food.  That 
trend may be further encouraged by the GOL's (unrelated) 
renewed enforcement of property tax collection, which will 
encourage productive use of land. 
 
¶7.  (U) The increase in gasoline prices has been a 
contributing factor, with particular impact on rural areas 
where fuel prices not only increase the cost of transport and 
other inputs, but reduce the number of vehicles plying the 
route.  The border with Guinea appears to be particularly 
volatile.  We have heard the Ministry of Commerce has not 
been able to enforce restrictions on transporting gasoline, 
cement and rice (and more recently palm oil) into Guinea 
where prices are higher. 
 
SUPPLY: Getting the food where the people are 
--------------------------------------------- 
 
¶8.  (SBU) GOL and industry sources tell us there is 
sufficient rice on hand to last until about August, and there 
are reasons for optimism.  Ministry of Agriculture crop yield 
analysis forecast a good harvest.  There is now evidence yet 
that farmers have responded, but to encourage domestic 
investment, the GOL has been providing technical services and 
free inputs, such as seeds, tools, and fertilizer, directly 
and via NGOs.  (This included 300 mt of seed rice.)  The GOL 
has also put priority on rehabilitating damaged agricultural 
infrastructure, and there are plans for a $30 million 
investment in large-scale commercial rice production. 
 
¶9.  (U) The inadequate infrastructure is a major impediment 
to exports and domestic trade.  Essential components include 
roads, warehouses and market facilities, all of which are 
high priorities under the GOL's Poverty Reduction Strategy. 
The USG and other donors are undertaking supply chain 
analysis of the full range of factors restricting transport 
of food. Liberia's land tenure system was inequitable before 
the war and conflicts over land ownership have been 
exacerbated by destruction of deeds and other land records 
and by fraudulent sales during the social disruption. The 
difficulty in confirming ownership hampers long-term 
investment and access to credit. 
 
POLITICAL IMPACT:  Remembering 1979 
----------------------------------- 
 
¶10.  (SBU) Despite the increasing price pressure, Liberia has 
not experienced public protests or violence and Liberians we 
talk to consistently say the memories of the aftermath of the 
1979 rice riots are still too fresh for violence to be an 
appealing option.  However, they also note that the 
frustration engendered by rising prices could inflame a 
demonstration triggered by another cause. 
 
ECONOMIC IMPACT:  What is due to price increases? 
--------------------------------------------- ----- 
 
¶11.  (U) It is difficult to tease out the impact of 
increasing prices from the influence of overall economic 
growth as macroeconomic data are limited.  The trade deficit 
increased 75% from 2005 to 2007, but most of that increase 
was from 2005-2006 rather than in the past year.  Although 
food and fuel account for most of the growth in the value of 
imports (with solid contributions from machinery, transport 
equipment and manufactured products), the timing indicates 
the increase was due in large part to higher demand related 
to the overall economic recovery.  The increasing price of 
rubber, which accounts for $171 million of the total $184 
million in exports, has buffered impact on the trade balance. 
 
 
¶12. (U) Liberia's traditional exports -- minerals, timber and 
tree crops in addition to rubber latex -- would have provided 
solid revenue had the sectors been producing.  However, tree 
crops, including rubber, will not resume peak production 
until new trees reach maturity, in approximately five years. 
Although UN timber sanctions were removed in 2006, exports 
have not yet resumed.  There are increasing investments in 
mining but those, too, are several years from producing 
export revenue. 
 
ENVIRONMENTAL IMPACT:  Lots of land, lots of water 
--------------------------------------------- ------ 
 
¶13.  (U) With low population density, ample rainfall and 
 
MONROVIA 00000325  003 OF 004 
 
 
almost no mechanization, the environmental impact has been 
minimal.  Food is easy to grow, with cassava and other 
tubers, tropical fruits and fish readily available much of 
the year.  Of greater environmental concern is damage from 
the concentration of population in Monrovia, which far 
exceeds capacity of the city's infrastructure.  The 
President's call for Liberians to return to the land may have 
the additional benefit of encouraging some of those who 
sought refuge in the capital during the war to return to 
rural areas. 
 
GOVERNMENT POLICY RESPONSE:  All we need is subsidized rice 
--------------------------------------------- -------------- 
 
¶14.  (SBU) Rice is designated a "sensitive" commodity and has 
a volatile history.  It has long been subject to GOL efforts 
to manipulate price and supply, which has led to periodic 
shortages, hoarding and rent-seeking.  The GOL is still 
trying various strategies to break the perceived control of 
the rice market by Lebanese importers but so far the cure 
(giving a monopoly on imports to a Liberian firm) has not 
worked and recently the restriction on the former importers 
has been relaxed. 
 
¶15.  (U) The Poverty Reduction Strategy calls for expanding 
agricultural production by at least 3.6% a year in 2009 and 
¶2010.  Agriculture and fisheries account for an estimated 42% 
of GDP and are considered the sectors most likely to show 
growth quickly.  The GOL is directly supporting inputs such 
as seeds and fertilizer (targeting the neediest), and has 
provided 300 mt of seed rice to farmers.  To improve food 
security, the GOL intends to rebuild roads and storage 
facilities, and develop a targeted social safety net. 
 
IMPACT ON POST PROGRAMS:  Stay the course 
------------------------------------------ 
 
¶16.  (SBU) Post's programs are focused on supporting the 
GOL's poverty reduction programs, boosting incomes, 
rebuilding infrastructure such as farm-to-market roads, and 
encouraging agriculture.  The increase in prices confirms the 
validity of those choices and may, in fact, support our goals 
by increasing the incentive to return to the land.  A rising 
frustration among Liberians at the slow pace of progress 
reinforces the need for the USG (and the GOL) to continue to 
focus on tangible projects with immediate benefit and to be 
effective in publicizing those successes.  The USG, in 
partnership with the GOL and private sector, should continue 
to support market development as a key step toward staple 
food self reliance. 
 
POLICY PROPOSALS: What Next? 
----------------------------- 
 
¶17. (SBU) While responding to the needs of vulnerable 
populations and compensating for the damage and disruption of 
the war in the short-term, the GOL should continue its 
initiatives to make the business climate more inviting and 
remove or reduce barriers to trade. The growing economy 
provides some breathing room for emergency response, and the 
rising prices support ongoing policies of increasing 
agricultural production and encouraging population growth 
outside Monrovia. 
 
Comment 
------- 
 
¶18.  (SBU) Liberia is a very fertile country, with great 
potential to expand agricultural production, even in the 
short term.  The GOL is working with donors and looking ahead 
to take steps to mitigate fallout from the rising prices. 
While Liberians are unlikely to face starvation in the 
absence of conflict, rice is a sensitive commodity.  For many 
Liberians, cheap, readily available rice is the main measure 
of the government's effectiveness. 
 
¶19. (U) Prices 
-------------- 
 
Following, for comparison purposes, are some standard prices: 
 
50 kg imported rice: 
      $30-35 "butter rice;"   from $20 in 12/2007 
      $40-50 par-boiled;      from $40 in 12/2007 
50 kg domestic rice:          $17 (L$245) 
50 kg flour:                  $30-45 
50 kg bag of potatoes:        $10-15 
 
MONROVIA 00000325  004 OF 004 
 
 
1 gallon gasoline:            $4 
 
3-gallon vegetable oil        $30 
1 gallon palm oil             $3-5 
ROBINSON