VZCZCXYZ0001
RR RUEHWEB

DE RUEHNT #0514/01 1230405
ZNR UUUUU ZZH
R 020405Z MAY 08
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC 9593
INFO RUEHTA/AMEMBASSY ASTANA 0148
RUEHAH/AMEMBASSY ASHGABAT 3935
RUEHBJ/AMEMBASSY BEIJING 1081
RUEHEK/AMEMBASSY BISHKEK 4550
RUEHDBU/AMEMBASSY DUSHANBE 0428
RUEHBUL/AMEMBASSY KABUL 2424
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RUEKJCS/SECDEF WASHDC
RHEHNSC/NSC WASHDC

UNCLAS TASHKENT 000514 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EARG EAID ECON ETRD PGOV PREL UZ
SUBJECT: IMPACT OF RISING FOOD/AG COMMODITY PRICES 
 
Ref: State 39410 
 
¶1. (SBU) Food and agricultural commodity prices have risen steeply 
in Uzbekistan over the past year and a half or more.  More recent 
spikes in world prices have been felt acutely in Uzbekistan, as in 
other Central Asian countries.  Embassy Tashkent maintains its own 
detailed price survey data for Uzbekistan.  These figures have been 
 
compiled for the past year, and we consider them to be more 
reliable than those available through other sources, including the 
International Monetary Fund (IMF).  Individuals wishing to review 
this data may contact Embassy Economic Specialist Jakhongir Mavlany 
 
at MavlanyJM@state.gov. 
 
¶2. (SBU) Demand: Wheat, beef, and cooking oil are the three most 
important food products.  Prices for each have more than doubled in 
 
the past two years.  Consumption has dropped in response. 
Uzbekistan is a net importer of wheat.  According to official 
figures, the country imported 2.4 million metric tons of wheat in 
2007, almost all of it food quality, to meet a domestic food demand 
 
of 5 million metric tons.  The country produced 6.2 million metric 
tons, with the majority of that used for fodder.  In 2008, official 
 
projections for wheat imports are 3 million metric tons. 
 
¶3. (SBU) Supply: The official grain production target for 2008-2009 
 
is 6.2 million tons, including 5.8 million tons of wheat. Uzbek 
government figures, however, are often unreliable.  The actual 
production of food products has probably declined, and some of the 
contributing factors are described in the following paragraphs. 
Input costs have had some impact, but they are offset in part by 
the relatively low use of fertilizers and the high level of manual 
labor. 
 
¶4. (SBU) Political impact: The political impact of rising prices is 
 
mitigated by the high percentage of Uzbeks now working abroad and 
remitting earnings home.  However, the government is acutely aware 
of the impact food shortages and higher prices have had on its 
popularity and on the potential for destabilization.  To date, 
protests have been limited and have largely ceased with the arrival 
 
of spring.  Many well-paid middle class Uzbeks have felt the impact 
 
of higher prices (including in areas such as housing), and they are 
 
acutely aware that a limited but growing wealthy elite now enjoys 
privileges they can no longer afford. 
 
¶5. (SBU) Economic impact: From a balance of payments standpoint, 
increased food imports have coincided with a sharp rise in 
UzbekistanQs revenues from exports of natural gas.  Nevertheless, 
for the majority of citizens, this means little.  Housing prices 
have increased, jobs in the provinces have disappeared, and food 
prices have gone up, making life noticeably more difficult for most 
 
citizens.  Many poor families Q we guess the majority of 
UzbekistanQs citizens Q are meaningfully and increasingly affected 
by every additional increase in price.  Though Uzbekistan is still 
largely rural, most families will see little benefit from rising 
prices. 
 
¶6. (SBU) Environmental impact: In Uzbekistan, 90 percent of 
farmland uses artificial irrigation.  Inefficient and crumbling 
irrigation systems lead to enormous water loss.  Upstream hydro- 
electric projects and off-season releases (or potential releases) 
are having a negative impact (or potentially negative impact) on 
water availability.  Snowfall in the mountains last year reportedly 
 
was lower than normal (despite punishing low temperatures), and 
river flows are slower this year.  Last year also saw regional 
shortages of water.  Beginning this year, the region has entered 
another cycle of hydrological drought that typically lasts for two 
to three years, with below normal surface water available for 
irrigation and environmental needs of ecosystems.  In addition, 
some reports Q unverified Q say Uzbekistan is losing upwards of 
20,000 hectares of arable land per year due to land degradation 
caused by unsustainable agricultural and irrigation practices.  Due 
 
to this yearQs freezing winter temperatures, some independent 
experts and observers believe that it will be extremely difficult 
to reach the state target of 5.8 million tons of wheat yield this 
year. 
 
¶7. (SBU) The government policy response: The government has 
announced measures to stimulate cattle production, but the impact 
will not be determined for some time.  The government has also 
announced urgent measures to build emergency wheat reserves. 
Russian press reporting from April 30 citing a source in 
UzbekistanQs Customs Committee indicated that the Government of 
Uzbekistan has unofficially banned the export of rice from the 
country to keep rice pricesQ-which have risen 80 percent since 
January--stable.  Many counterproductive economic and trade 
policies hinder agricultural production and the availability of 
imported goods.  Wholesale reforms are needed but carry enormous 
political risks, including that of immediate dislocations. 
Monopoly interests and corruption also hinder reform. 
 
Norland