O 301917Z APR 08
FM SECSTATE WASHDC
INFO TREASURY DEPT WASHINGTON DC IMMEDIATE 0000

UNCLAS STATE 039410 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ETRD ECON PGOV PREL
SUBJECT: SURVEY: IMPACT OF RISING FOOD/AGRICULTURAL COMMODITY 
PRICES 
 
REF: A) STATE 19145, B) STATE 14920 NOTAL, C) TRIPOLI 101, D) 
STATE 8902 NOTAL 
 
SENSITIVE BUT UNCLASSIFIED 
 
 
¶1.  (U) THIS IS AN ACTION CABLE.  See paragraph six. 
 
¶2.  (SBU) SUMMARY:  Rising food and agricultural commodity 
prices are having a significant impact on political stability 
and the economy in many countries around the world.  Food and 
agricultural commodity price rises have wide potential 
implications on USG policies, and there is a demand at the 
highest levels of the U.S. government for more accurate and 
comprehensive information about the impact of these price rises 
on countries throughout the world to better inform a review of 
existing food policies.  The excellent reporting by many posts 
has whetted the appetite in Washington for a more comprehensive 
survey that would compare the impact of rising prices across a 
broad range of developed and developing countries.  Therefore, 
this cable requests posts to provide short summaries of the 
impact of food/agricultural commodity price rises on host 
country and a list of past reporting cables on this subject. 
Post responses are requested by April 30.  Note:  Except to the 
extent it desires to respond, Embassy Baghdad is exempted from 
this request.  End summary. 
 
¶3.  (SBU) INTRODUCTION:  The prices of basic staples such as 
wheat, corn, soybeans, and rice, have risen dramatically in 
recent months.  The impact may be a net positive for 
agricultural commodity exporters, but can be devastating for 
developing countries that are net food importers.  In many poor 
countries, food expenses comprise more than half of household 
expenditures, compared to nine percent in the United States. 
Rising agricultural commodity prices are pushing many in the 
developing world over the line from poverty into privation or 
even hunger.  Developed countries are also feeling the impact, 
with rising grain prices hurting downstream industries, such as 
pork and beef producers, and drastically reducing the buying 
power of foreign aid and food assistance programs. 
 
¶4.  (SBU) Multiple factors appear to be causing the price rises. 
Studies differ on the relative ranking of these factors; while 
headlines point to biofuels as a prime culprit in the rise of 
grain prices, the actual picture is much more complex.  The 
following factors are clearly contributing to the rise in food 
prices:  1) significant increases in the cost of fertilizer and 
transportation due to record oil prices; 2) growing demand from 
a growing middle class in major economies such as India and 
China, which consume more meat, increasing the use of grain 
products for feed; 3) poor grain harvests in major exporting 
countries such as Australia and Canada; and 4) land use 
substitution from food crops to cash crops (cotton and biofuels 
are two examples).  Record low grain stocks add to an already 
precarious situation, while increases in grain prices impact 
feed costs and livestock prices, leading in turn to higher meat 
and dairy costs.  Although some of the recent rises may be 
speculative, most analysts believe the prices are real and may 
be long-run. 
 
¶5.  (SBU) The excellent reporting from many posts on the 
economic and political impact of price rises is widely read and 
greatly appreciated by Washington.  However there is a need for 
information to form a broader, more comprehensive picture of the 
impact of food and agricultural commodity price rises across a 
range of developed and developing countries.  This information 
is needed as soon as possible in order to inform policy. 

¶6.  (SBU) ACTION REQUEST:  Posts are requested to provide one or 
two paragraphs summarizing the impact of food and agricultural 
commodity price increases on each of the following seven topics: 
food and agricultural commodity demand, supply, domestic 
politics, economy, environment, host government policies, and 
post programs.  Posts are encouraged to comment on the policy 
changes that are needed in their host countries.  Suggestions 
for U.S. policy are also especially welcome.  Finally, posts 
should send a list of previous reporting cables on this subject 
so that Washington can develop a complete picture of the impact 
of food price rises.  We expect that posts will draw on 
information from all sections of the embassy, including economic 
and political sections, USAID, FAS, FCS, Treasury attach,, PAS, 
and other sections as appropriate.  Post may also approach host 
governments and/or representatives of relevant international 
organizations for information as appropriate.  Talking points on 
current USG policies to address the impact of food price rises 
will be sent septel in case governments ask for such 
information.  Post responses are requested by April 30.  Posts 
should respond by cable. (Except to the extent it desires to 
respond, Embassy Baghdad is exempted from this request.)  In the 
response, the tag line should include EAGR, the slug line should 
include EEB/TPP/ABT/ATP Janet Speck and the subject line should 
be:  RESPONSE:  IMPACT OF RISING FOOD/COMMODITY PRICES - COUNTRY 
¶X.  Questions on this cable may be sent to EEB/TPP/ABT/ATP Janet 
Speck, speckjg@state.gov, 202-647-3059. 
 
¶7.  (SBU) For posts' guidance only, below is a list of suggested 
issues, under each of the seven broad topics that post may want 
to address in discussing price impacts on their host countries. 
We realize that not every issue will be relevant to every 
country and posts should not feel obliged to address issues that 
are not applicable. However, we would appreciate some response, 
even if the response is that food prices have had no impact, on 
each of the seven broad topics.  This will make comparison 
between countries much clearer.  Posts that have done 
significant reporting of this issue may draw on previous 
reporting to accomplish this task. 
 
DEMAND:  What are the most important, essential 
foods/agricultural commodities consumed in host country?  How 
have prices changed with regard to these foods/commodities? Is 
host country a net importer or exporter of those commodities? 
What percentage of domestic consumption is satisfied by domestic 
production?  Have there been shifts in consumption towards 
alternative commodities?  What are the differences in the impact 
of rising food prices on different groups (e.g., rich vs. poor, 
urban vs. rural, ethnic groups), on different regions?  How have 
rising incomes affected consumption patterns? 
 
SUPPLY:  Is there evidence that domestic agricultural production 
is responding to changes in prices?  Has there been an increase 
in investment, domestic or foreign, in food production?  Is 
there an increase/decrease in land used in food production? 
Have higher input costs affected food production/prices?  Are 
there changes in food inventories/stocks?  Are shortages of 
storage or food processing facilities contributing to crop 
losses?  Are there other bottlenecks in supply chains?  What is 
the effect on exports and/or capacity to supply food assistance? 
Has there been a shift in production between food and non-food 
commodities or an increase in the use of food crops for non-food 
purposes (such as fuels)?  Are there other factors affecting 
supply, such as weather or government policies? 
 
POLITICAL IMPACT:  Have there been public protests or violence? 
What is the effect on the stability of host government?  Has 
there been an impact on friction between classes, ethnic groups 
or urban/rural populations?  Has there been any impact on public 
attitudes toward agricultural biotechnology and/or biofuels? 
 
ECONOMIC IMPACT:  How significant has the rise in food prices 
been in its impact on inflation, balance of payments, trade 
balance, the fiscal situation or any other important economic 
indicator?  How might this affect private sector development and 
medium-term economic growth prospects?  Approximately how many 
poor households are net food consumer who would be impoverished 
by the food price rises and approximately how many are net 
producers and could benefit? 
 
ENVIRONMENTAL IMPACT:  Have rising prices had an impact on 
issues such as deforestation, water availability and quality, 
soil conservation, etc.? 
 
GOVERNMENT POLICY RESPONSE: Has host government made changes in 
tariffs, quotas or other import restrictions?  Have there been 
export restrictions?  Have there been nationalizations and/or 
redistributions of private farms or industries?  Are there 
changes in policies on food assistance?  How are Central Banks 
reacting to food-price-driven inflationary pressures?  What 
about price subsidies, cash transfers and other assistance to 
the population?  Are there policy efforts to promote food 
production?  Are there changes in trade, environment, biotech, 
SPS or other policies?  Is there any impact on relations with 
other countries? 
 
IMPACT ON POST PROGRAMS:  What impact, if any, has there been on 
post's programs? 
 
POLICY PROPOSALS:  What policy recommendations would post 
recommend to host government?  What changes in USG policy would 
you recommend in order to address the problem of food price 
rises, given the experience of your host country? 

 
¶8.  (U) Minimize considered. 
 
RICE