This record is a partial extract of the original cable. The full text of the original cable is not available.

170718Z May 06

UNCLAS SECTION 01 OF 02 LAGOS 000665 
 
SIPDIS 
 
FROM OFFICE OF AGRICULTURAL AFFAIRS 
 
USDA FOR FAS /FAA/FAS/RANDY HAGER 
USDA FOR FAS /CMP/FRANK LEE, ROBERT REIMENSCHNEIDER, CINA 
RADLER, 
USDA FOR FAS /OA/GSM/KIRK MILLER 
USDOC FOR 3317/ITA/OA/KBURRESS 
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS 
STATE PASS USTR 
 
TOFAS 007 
 
E.O. 12958, N/A 
TAGS: EAGR ETRD PGOV NI
SUBJECT: NIGERIA LARGEST MARKET FOR U.S. WHEAT/RICE 
PRODUCTION INCREASES MODESTLY 
 
 
¶1. SUMMARY: As the June 2005 - May 2006 Marketing Year comes 
to conclusion, Nigeria is presumed to be the number one 
market in the world for U.S. Wheat ahead of traditional 
front-runners; Japan and Mexico.  For the fourth consecutive 
year Nigeria is the world's leading importer of U.S. hard 
red winter wheat.  Nigeria's wheat imports this year are 
estimated at 3.8 million tons, up from 3.0 million tons last 
year.  U.S. Wheat has maintained a market share of between 
85-90 percent over the past five years.  The sustained 
increase in wheat imports is fueled by rapid growth in 
bread, pasta and biscuit consumption and cross-border trade 
with neighboring countries.  Meaningful domestic rice 
production is up yet still lags behind demand by two million 
tons annually. The GON's protective duty of 100 percent on 
rice imports is encouraging large-scale smuggling.  GON 
efforts to liberalize import tariffs within the framework of 
the ECOWAS Common External Tariffs. Many agricultural 
imports remain banned. End summary 
------------------------------------ 
AMERICAN WHEAT NUMBER ONE IN NIGERIA 
------------------------------------ 
 
¶2.  Nigeria's overall wheat imports in the 2005/06 marketing 
year may reach a record 3.8 million tons, with the U.S. 
holding the dominant market share of roughly 3.3 million 
tons (close to 90 percent).  The GON imposed a wheat import 
ban from 1986-1992.  The growth in wheat imports since the 
ban's lifting in 1992 has been phenomenal.  Since 1995, per 
capita wheat consumption tripled from six kilograms to 
nearly 20 kilograms in 2005.  Wheat imports are increasing 
due to greater consumption of bread, pasta, biscuit products 
and informal cross-border exports. The growth has also been 
helped by a relatively stable exchange rate, competitive 
wheat prices, high crude oil prices, modest economic growth, 
and the steady price increases for other food staples such 
as cassava. 
 
¶3.  New mills are being established, while existing 
operators are making sizeable capital investments in new 
milling capacity to meet future demand.  The entrance of 
several aggressive new millers in the past five years has 
generated intense competition among millers.  Bakery 
operations are being modernized and expanded to satisfy 
growing demand especially for bread.  Should the demand for 
flour by biscuit, pasta and noodle manufacturers is 
increasing rapidly as they attempt to fill the supply void 
created by the GON's import ban on these products. Given 
current trends in the market, industry sources predict U.S. 
Wheat exports will exceed 5 million tons within the next 
three years.  Canada and Argentina are our principal 
competitors in this market. 
 
¶4.  The GON has directed millers to include ten percent 
cassava in wheat flour by July 1, 2006 or face closure. 
Although millers are prepared to commence this policy, at 
present industry grade cassava flour is not readily 
available in the country.  Given the enormous resources 
required to increase cassava production and upgrade 
processing facilities, it is unlikely flour millers will 
meet the deadline.  In the meantime, millers have responded 
to the challenge by jointly establishing a 500-million naira 
($3.9 million) empowerment fund to encourage cassava growers 
and processors.  Industry sources report the cassava 
requirement would not affect growth in wheat imports in 
marketing year 2006/07. 
 
------------------------------- 
GON RICE POLICY AS SOME EFFECT 
------------------------------- 
 
¶5.  Domestic rice production continues to trend upward due 
largely to incentives under the Presidential Initiative on 
Rice.  The initiative is the cornerstone GON's efforts to 
achieve self-sufficiency in rice production.  Also, farmers 
are protected by the 100 percent duty on rice imports. 
Despite the high duty, rice imports continue to rise because 
local output is inadequate to match the growth in overall 
consumer demand for rice.  The high duty on rice continue to 
encourage large-scale cross border smuggling. 
 
¶6.  Nigeria's aggregate grain production in marketing year 
2006/07 is forecast to increase five percent.  The forecast 
is based on the timely arrival of rains in the grain belt. 
The GON is promoting increased food production in the 
country through a number of new initiatives, namely the 
National Special Program for Food Security, Presidential 
Initiative on Rice and the Fadama II project (irrigation 
farming). 
 
¶7.  Although figures are not readily available, a 
significant quantity of grain is exported informally in 
cross-border trade with neighboring countries, especially 
the Niger republic.  A spot visit to the Dawanou 
international grains market in northern commercial city of 
Kano revealed a minimum of thirty tons is of grains and 
other food items leave the Kano market every week for the 
Niger Republic. 
 
¶8.  Field visits to northern grain production zones revealed 
that despite some benefits from these initiatives, Nigerian 
farmers continue to face the dual problems of low 
productivity due to lack of basic farm inputs and the 
absence of adequate price support mechanisms.  Scarcity and 
high prices continue to limit fertilizer use.  The average 
retail price of a 50-kilogram bag of NPK increased to 3,500 
naira ($27) in 2005, up from an average of 3,000 naira ($23) 
a year earlier.  The absence of a buyer of last resort 
leaves farmers at the mercy of Nigeria's highly volatile 
market environment. The ratio of extension agents to farmers 
in the country is estimated at 1: 3000, thus making the 
transfer of technology to farmers difficult. 
Browne