VZCZCXRO2076
RR RUEHMA RUEHPA
DE RUEHCO #0255/01 1210640
ZNR UUUUU ZZH
R 300640Z APR 08
FM AMEMBASSY COTONOU
TO RUEHC/SECSTATE WASHDC 0301
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 COTONOU 000255 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/TPP/ABT/ATP JANET SPECT AND AF/W DANA BANKS 
 
E.O. 12958: N/A 
TAGS: EAGR PGOV BN
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES - BENIN 
 
REF: (A) STATE 39410 (B) COTONOU 5 
 
1.(U) Please find responses keyed to questions in Ref A below. 
 
------ 
Demand 
------ 
 
2.(SBU) Cornmeal is Benin's primary staple.  According to Benin's 
National Food Aid and Security Office (ONASA), the price of cornmeal 
increased from 125 CFA ($.30) a kilogram in April 2007 to 240 CFA 
($.57) a kilogram in April 2008.  This 90% increase in a little more 
than a year has had a deleterious effect on the food budget of the 
average Beninese family.  Benin is a net exporter of corn.  Embassy 
contacts in ONASA and Benin's Ministry of Agriculture attribute much 
of the increase in the price of corn to increased demand from 
Nigeria and Niger after below average harvests in those countries. 
 
3.(SBU) Other food commodities, which are important in the Beninese 
market include rice, wheat flour, tomato paste, and oil.  Benin 
imports the vast majority of these commodities.  According to ONASA, 
during a normal year Benin ill run a rice deficit of 50 thousand 
tons and iport between 300 - 400 thousand tons to meet this eficit 
with the rest re-exported to Nigeria.  Risng food prices have hit 
hardest poor city dwelles and those living in rural villages with 
weak 207 crop yields. 
 
------ 
Supply 
------ 
 
4.() All basic food commodities are available in suffcient 
quantities in Benin's market albeit at highr prices. After a 
delayed start to the rainy seaon the 2008 growing season has just 
begun and itis too early to tell if farmers are responding to he 
increasing price of corn to put more land int cultivation.  Any 
attempt to increase cultivatedland would be hobbled by a lack of 
access to theseed and fertilizer necessary for such an increase 
 
---------------- 
Political Impact 
--------------- 
 
5.(SBU) Benin has not witnessed signifiant protests or violent acts 
in response to risin food prices.  While many blame the government 
fr not acting to limit increasing food prices, the overnment has 
deflected some criticism by going ublic early, in December 2007, 
with its concerns over rising food prices and the actions it was 
taking in response (Ref B).  In recent municipal elections the party 
most closely associated with President Yayi, Force Cowrie for an 
Emerging Benin (FCBE), did reasonably well throughout Benin despite 
the increase in food prices. 
 
--------------- 
Economic Impact 
--------------- 
 
6.(U)  The economic impact of rising food prices is felt across 
Benin including in some unsuspecting places.  While increasing food 
prices are often linked to stressed family food budgets, they also 
affect the economic livelihoods of the many women who make their 
living selling prepared foods and bread on the streets of Benin's 
major cities.  A strike by bakers last fall, called in response to 
the rising price of flower, caught many women who re-sell bread 
unprepared for a three-day hiatus in their income.  As prices inch 
upward their bottom line becomes more difficult to sustain.  While 
the prices of staple goods have certainly increased inflation has 
not skyrocketed.  According to Benin's National Institute for 
Statistics and Analysis, the inflation rate in January 2008 (the 
most recently available measurement) stood at 1.3%. 
 
-------------------- 
Environmental Impact 
-------------------- 
 
7.(U) Rising food prices have had no known environmental impact in 
Benin. 
 
-------------------------- 
Government Policy Response 
-------------------------- 
 
8.(SBU) As detailed in Ref B, the government began to respond to 
rising food prices in early December 2007 by dropping taxes on 
imported foodstuffs, including rice, wheat, and dried milk, in 
return for the imposition of price controls.  The Ministry of 
Commerce estimated the costs of these tax credits at $6.6 million a 
month.  After almost four months of this policy the market price for 
rice, and the other controlled goods, remains higher than the price 
set by the government. For example, the government price for a 50 
 
COTONOU 00000255  002 OF 002 
 
 
kilogram bag of rice is 13,000 CFA ($31) or a per kilogram cost of 
260 FCFA ($.62).  The market price is now 450 FCFA ($1.07).  Apart 
from a few well-publicized visits to major markets by high ranking 
government officials, there appears to be little political will to 
force market sellers to reduce their prices. 
 
9.(SBU) In addition to the attempt at price controls the government 
directed ONASA in December 2007 to use 480 million FCFA ($1.15 
million) to build a strategic reserve of corn for use as prices 
increased during the period before the 2008 harvest.  ONASA was able 
to constitute the reserve with purchases on the local market.  The 
government ordered ONASA to begin selling the corn on April 2 at a 
price of 165 FCFA ($.39) a kilogram, which is well below the market 
price of 240 FCFA ($.57).  The government recently requested that 
ONASA make a further corn purchase of 266 million FCFA ($636,000) to 
increase the quantity held in the strategic reserve.  ONASA is 
having difficulty finding the corn to buy on the local market, 
according to an embassy source at ONASA. 
----------------------- 
Policy Response/Comment 
----------------------- 
 
10.(SBU) Benin's increasing food prices seem to stem from a reduced 
harvest in 2007, increasing worldwide prices, and an increase in 
demand for corn from its neighbors.  The government's attempt at 
price controls has been ineffectual and any real effort to force 
market sellers to limit their prices will result in social unrest. 
A better use of the government's money might be to increase the use 
of fertilizers on food crops during the upcoming growing season. 
According to the Ministry of Agriculture, only 41% of the area under 
cultivation received the appropriate amount of fertilizer in 2007. 
Better use of fertilizer and other improved farming techniques could 
increase Benin's corn yield from a paltry 24 bushels an acre in 2007 
(the average U.S. corn yield in 2007 was a 151 bushels an acre) to a 
higher yield in the coming years.  The increase in crop yields in 
Benin has traditionally only kept even with population growth which 
leaves little margin for error in years with too little rain or 
other adverse conditions. 
 
11.(SBU) Road construction in rural areas would also be beneficial 
as it could induce farmers who cannot now send their food to market 
to grow more as a cash crop.  ONASA reports that it is not selling 
its subsidized corn in some areas of Benin because the market price 
of corn in those areas is below its subsidized price.  This points 
to inefficiencies in food distribution and lost profits for 
farmers. 
 
12.(SBU) Rising food prices require a regional response in West 
Africa.  The food markets of Benin are closely linked to the demand 
of its neighbors.  USG policy in response to rising prices should 
advocate that West African countries keep their borders open to the 
import and export of food as that will keep prices lower across the 
region and urge countries to take the steps necessary to increase 
crop yields. 
 
BROWN