VZCZCXRO4253
PP RUEHROV
DE RUEHKH #1062/01 1241446
ZNR UUUUU ZZH
P 041446Z MAY 06
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 2625
INFO RUCNFUR/DARFUR COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 KHARTOUM 001062 
 
SIPDIS 
 
AIDAC 
SIPDIS 
 
STATE FOR AF/SPG, PRM, AND ALSO PASS USAID/W 
USAID FOR DCHA SUDAN TEAM, AF/EA, DCHA 
NAIROBI FOR USAID/DCHA/OFDA, USAID/REDSO, AND FAS 
USMISSION UN ROME 
GENEVA FOR NKYLOH 
NAIROBI FOR SFO 
NSC FOR JMELINE, TSHORTLEY 
USUN FOR TMALY 
BRUSSELS FOR PLERNER 
ABUJA PLEASE PASS C. HUME 
 
E.O. 12958:  N/A 
TAGS: EAID PREF PGOV PHUM SOCI KAWC SU
SUBJECT: Sudan's Strategic Commodity Reserve Authority 
 
Ref: Khartoum 0939 
 
------------------- 
Summary and Comment 
------------------- 
 
¶1.  On April 19, 2006, a USAID food security 
representative met with Badawi El Khair, Director General 
of Sudan's Strategic Commodity Reserve Authority (SCRA), 
and Ahmed Mardas, head of the SCRA marketing section, to 
discuss the agency's ongoing efforts to maintain food 
security in Sudan.  The SCRA, which was established in 
late 2000, is a Government of National Unity (GNU) 
mechanism to stabilize grain prices over the annual 
agricultural production cycle by maintaining a national 
cereal reserve in order to implement a floor price policy 
of market intervention. 
 
¶2.  In 2005, the SCRA claims to have distributed 270,000 
metric tons (MT) of grain throughout Sudan.  (Note: 
USAID food security analyst can neither confirm nor deny 
the accuracy of this claim.  End note.)  The SCRA does 
not currently coordinate its grain distribution 
operations with donors, the U.N. World Food Program 
(WFP), or international non-governmental organizations 
(NGOs) providing food assistance in Sudan.  The 
international humanitarian community should open a 
dialogue with the SCRA to gain visibility on SCRA's 
regional food distributions in order to improve food 
security for the people of Sudan.  End summary and 
comment. 
 
-------------------- 
SCRA Grain Purchases 
-------------------- 
 
¶3.  The role of the Strategic Grain Reserve is to serve 
as a price stabilization mechanism for the country.  Each 
year the reserve enters the marketplace and buys sorghum 
after the harvest.  The sorghum is then held and released 
into selected markets, or even distributed at times for 
free, at the discretion of the government.  The 
international community consistently has questioned why 
this mechanism is not used for to fill gaps in 
international food aid pipelines or contribute to 
humanitarian programs in Sudan. 
 
¶4.  This year, the SCRA plans to procure 500,000 metric 
tons (MT) of sorghum at a floor price of Sudanese Dinars 
(SD) 5,000 per 90 kilogram (kg) sack for a total cost of 
SD 25 billion, or USD 11 million.  Of the 500,000 MT 
total, SCRA will purchase only 150,000 MT of sorghum 
directly from producers.  SCRA will buy the remaining 
350,000 MT of sorghum through a consortium of banks 
(150,000 MT) and private investors (200,000 MT) who will 
each retain a margin of profit from their grain sales to 
the strategic grain reserve. 
 
¶5.  According to an SCRA official, the office recently 
received funding from the GNU Ministry of Finance and has 
deployed purchasing teams to six of Sudan's large 
mechanized farming areas to begin the procurement 
process:  Gedarif, Ed Damazine, Sennar, Habila in 
Southern Kordofan State, Er Renk in Upper Nile State, and 
Kosti.  SCRA officials have clearly stated that they 
cannot afford to buy sorghum at a price above SD 5,000 
per 90 kg sack.  Though recent grain prices in Sudan have 
fluctuated from SD 4,600 to SD 5,100, SCRA is expecting 
sorghum prices to decline as a result of decreasing 
demand created by the culling of birds in response to 
Sudan's recent outbreak of avian influenza.  Sorghum is 
used as an ingredient of chicken feed by many large 
producers. 
 
--------------------------------------------- -------- 
Use of Strategic Reserve in Humanitarian Crisis Areas 
--------------------------------------------- -------- 
 
¶6.  Darfur:  According to the SCRA, Darfur currently has 
the lowest cereal prices in Sudan due to local 
humanitarian aid distributions by the international 
 
KHARTOUM 00001062  002 OF 002 
 
 
community.  The average price of a 90 kg sack of sorghum 
in Darfur is SD 4,000, 20 percent lower than the country- 
wide average of SD 5,000.  Given these low prices, it is 
unlikely that the SCRA will distribute food in Darfur. 
 
¶7.  Kassala and Red Sea States:  Each month, the SCRA 
contributes 1,800 MT of sorghum to Kassala State and 
2,250 MT to Red Sea State.  In March, as the hunger 
season advanced, SCRA contributed 6,840 MT to Kassala 
State and 9,000 MT to Red Sea State, according to the 
SCRA official.  It is unclear how this food is actually 
distributed.  When a USAID team visited Kassala from 
April 20 to 23 (septel), local humanitarian workers said 
that SCRA food distributions are often used as a 
political, rather than a humanitarian, tool.  WFP's food 
distribution system in eastern Sudan targets over 190,000 
people with 17,000 MT of food. 
 
---------- 
Commentary 
---------- 
 
¶8.  Constraints/Limitations:  SCRA's ability to moderate 
grain floor prices across Sudan is limited by low state 
government capacity to fund and coordinate the regional 
distribution of food, (and by interference of politics in 
the destination and use of the food).  Under current SCRA 
policy guidelines, state governments are responsible for 
transporting grain reserves from SCRA's storage 
warehouses to their local market.  Since many of Sudan's 
state governments lack fiscal resources, this policy 
often delays the shipment of food commodities to their 
intended destination.  In some cases, food commodities 
have been monetized to pay for transportation costs, thus 
reducing the quantity of food available to local 
beneficiaries. 
 
¶9.  Potential for Collaboration:  The establishment of a 
transparent information-sharing network between SCRA and 
the international humanitarian community has the 
potential to facilitate market surveillance and improve 
efficiency of food assistance activities throughout 
Sudan.  To date, SCRA's operations have not been 
disclosed to the international community.  Thus, SCRA 
food distributions do not enter into discussions 
surrounding food assistance operations in Sudan.  Given 
its poor reputation for controlling and limiting NGO 
activities in Sudan, the Humanitarian Aid Commission 
(HAC) surprisingly employs several technical experts who 
could be encouraged to assist in building these linkages. 
Given WFP's impending ration cuts which will likely 
result in rising food prices in areas like Darfur, the 
role of the SCRA in stabilizing market prices becomes 
more important.  Opening a dialogue with SCRA, 
potentially through technical experts working for the 
HAC, might be one way to move this dialogue forward. 
 
STEINFELD