VZCZCXRO5179
RR RUEHAG RUEHAST RUEHBW RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVB #0348 1211034
ZNR UUUUU ZZH
R 301034Z APR 08 ZDK
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC 8868
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS ZAGREB 000348 
 
SIPDIS 
 
DEPARTMENT FOR EEB/TPP/ABT/ATP Janet Speck 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ETRD PGOV HR
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES - CROATIA 
 
REF: A. STATE 39410, B. ZAGREB 310 
 
¶1. This cable responds to reftel A. 
 
¶2. The most important food and agricultural commodities consumed in 
Croatia are wheat, corn (as animal feed), sunflower seeds (as edible 
oil), poultry, beef/veal, pork, and dairy products. Croatia produces 
enough wheat and poultry for its own needs. Corn is produced in 
surplus; pork is produced in sufficient quantities but certain 
quality cuts are imported; oil seeds and dairy products are produced 
but in insufficient quantities. 
 
¶3. Grain prices in March 2008 on the Croatian market were 49% to 93% 
higher than in March 2007. High grain prices drove meat and dairy 
prices up, such that food prices in March 2008 were 10.2% higher 
than in March 2007. Fruits and vegetables, edible oil, bread, 
grains, dairy products and eggs saw the largest price increases. 
Some large meat producers have warned wholesale buyers to expect a 
20-30% increase in prices in May. The price increases have not 
caused a significant shift in consumption towards alternative 
commodities, though there has perhaps been a decrease in consumption 
in general. 
 
SUPPLY 
 
¶4. Domestic agricultural production is responding to changes in 
prices. Farmers are shying away from pork production because of high 
feed prices (mainly corn). Many would like to produce corn, due to 
the availability of state subsidies and the expectation that the 
high price will linger. Currently, a shortage of cold storage is 
contributing to losses of domestic vegetable production. Investment 
in food production has not increased significantly, nor has the 
amount of land in use for food production increased or decreased 
significantly. 
 
POLITICAL IMPACT 
 
¶5. Rising food prices, along with fuel prices, have been the primary 
driver of inflation in Croatia and have raised concern among the 
public. Inflation and particularly the rise in food prices have 
received considerable media attention. On April 12, labor unions 
organized a demonstration in Zagreb that drew about 40,000 people, 
the largest protest crowd in recent history. The official theme of 
the demonstration was "together for higher pay," but inflation was 
also a concern motivating many who attended. The event has had no 
direct effect on government policies or stability. (reftel B) 
 
¶6. The food price situation has not caused friction between classes, 
ethnic groups, or urban and rural populations. It has had no effect 
on attitudes towards biotechnology (still negative), although 
attitudes towards biofuels are changing slightly from positive to 
skeptical. 
 
ECONOMIC IMPACT 
 
¶7. Inflation grew the last five months of 2007 and reached 5.8% in 
December, due mainly to high oil and food prices, as well as high 
prices of agricultural products. Inflation has remained near 6% thus 
far in 2008. Croatia's economic growth is expected to slow from 5.6% 
in 2007 to 4.3% in 2008. 
 
GOVERNMENT POLICY RESPONSE 
 
¶8. In autumn 2007, in an attempt to prevent a shortage of grain, the 
GOC placed temporary (until summer 2008) export tariffs on corn and 
wheat. The GOC has also temporarily lifted import tariffs on 
specified quantities of corn, wheat, and raw sunflower oil. 
 
¶9. The food price increases have had no significant environmental 
impact thus far. Nor have the had a major effect on post programs. 
 
BRADTKE