VZCZCXRO8551
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0001/01 0020511
ZNY CCCCC ZZH
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FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8501
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RUCNDT/USMISSION USUN NEW YORK 2158
RUEHBS/USEU BRUSSELS

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000001 
 
SIPDIS 
 
STATE FOR EAP/MLS, INR/EAP 
DEPT PASS TO USDA 
DEPT PASS TO USAID 
BANGKOK FOR USDA/FAS 
PACOM FOR FPA 
TREASURY FOR OASIA, OFAC 
 
E.O. 12958: DECL: 01/02/2019 
TAGS: EAGR ECON EFIN PREL PGOV BM
SUBJECT: BURMA: RICE EXPORTS LOWER THAN EXPECTED IN 2008 
BUT LIKELY TO INCREASE IN 2009 
 
REF: A. 08 RANGOON 874 
     ¶B. 08 RANGOON 075 
     ¶C. 08 RANGOON 285 
 
RANGOON 00000001  001.2 OF 003 
 
 
Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4 
(b and d). 
 
Summary 
------- 
 
¶1. (C)  Despite GOB expectations that rice exports in 
November and December would total 300,000 metric tons, 
Burmese traders and military-owned Myanmar Economic 
Corporation (MEC) exported only 45,000 metric tons of rice 
during this period.  Demand for Burmese rice remains low, as 
international customers refuse to pay relatively high prices 
for inferior quality Burmese rice.  According to SGS 
Consultants Managing Director U Kyaw Tin, GOB officials 
predict Burma will have a rice surplus of three million 
metric tons in 2009, which will be available for export. 
Agricultural specialists challenge those expectations, noting 
that Burma lacks the infrastructure to mill, store, 
transport, and ship that much rice.  Most specialists agree 
that official 2009 exports will likely total between 
500,000-750,000 metric tons, assuming prevailing conditions. 
End Summary. 
 
Lifting Ban Does Not Guarantee Exports 
-------------------------------------- 
 
¶2.  (C)  The Burmese Government, expecting a 300,000 metric 
ton rice surplus after the November 2008 harvest, lifted its 
ban on rice exports on November 4, issuing 11 export permits 
to 10 companies (Ref A).  While traders had urged the GOB for 
months to lift the export ban so they could sell their more 
than 200,000 metric tons of rice stocks, Burmese rice prices 
had fallen by 63 percent (from USD 800/metric ton to USD 
260/metric ton) by November, making exports of old rice 
unprofitable.  By the end of December, Burma exported 45,000 
metric tons of rice -- 33,000 metric tons to Cote d' Ivorie 
and 12,000 metric tons to Bangladesh.  The majority was 
exported by MEC; otherwise, only Aye Ya Shwe Wah Company, 
owned by Tay Za and Aung Thet Mann, shipped 7,000 metric tons 
to Bangladesh in November, SGS Consultants Managing Director 
U Kyaw Tin informed us.  He reported that both MEC and Aye Ya 
Shwe Wah paid farmers USD 160/metric ton for recently 
harvested rice and sold it for USD 280 per metric ton, 
earning USD 120/metric ton in profit. 
 
¶3.  (C)  Agricultural trader Anwar Hussein told us that lower 
profitability was only one reason why rice traders refused to 
export.  The real reason:  most Burmese traders lacked the 
capital to purchase new rice for export and were unwilling to 
take a loss by exporting their existing stocks, purchased at 
considerably higher prices before the GOB authorized foreign 
sales.  Instead, Hussein noted that most traders plan to 
export their existing rice stocks only when prices increase, 
which they believe should occur by March.  U Kyaw Tin 
commented that while the traders' plans made financial sense, 
he was unsure whether the traders had the proper facilities 
to store rice for long periods of time.  He surmised that by 
February, much of the older rice stocks could begin to rot, 
making it impossible to sell. 
 
2008 Rice Exports Lower than Expected 
 
RANGOON 00000001  002.2 OF 003 
 
 
------------------------------------- 
 
¶4.  (C) Rice export values have fluctuated widely during the 
past six years, due to low rice production, heavy floods in 
rice producing areas, and the high price of domestic rice. 
In 2006 and 2007, Burma's rice production declined 
dramatically due to heavy flooding in Irrawaddy and Sagaing 
Divisions, prompting the GOB to limit exports.   In late 
2007, the GOB announced that it would export approximately 
400,000 metric tons of rice in the first six months of 2008, 
a more than 1000 percent increase over 2007 levels (Ref B). 
Bolstered by strong exports during the first half of 2008, 
the GOB later predicted that official rice exports would 
total 800,000 by December 2008 (Ref C).  However, rice 
exports were disrupted in May, after Cyclone Nargis 
devastated much of the Irrawaddy Division, Burma's main rice 
producing region.  By December 2008, GOB official statistics 
showed exports totaling approximately 468,000 metric tons of 
rice, an increase of 1400 percent over 2007 figures but still 
well below the GOB's revised target.  According to U Kyaw 
Tin, official rice export figures do not include border trade 
with Bangladesh or exports by MEC.  A more accurate figure is 
700,000 metric tons, he estimated. 
 
--------------------------------------------- ------- 
      Burma's Official Rice Exports, 2007-2008 
                     In Metric Tons 
--------------------------------------------- ------- 
Year         Amount Exported          Percent Change 
--------------------------------------------- ------- 
2003             398,000                    -- 
2004             115,297                   -71 
2005             219,624                    90 
2006              46,815                   -79 
2007              31,200                   -33 
2008             468,641                  1402 
--------------------------------------------- ------- 
Source: SGS Consultants, December 2008 
 
2009: Year of Burmese Rice? 
--------------------------- 
 
¶5.  (C)  GOB officials, predicting a rice surplus of 
approximately three million metric tons, expect Burmese rice 
exports to increase dramatically in 2009.  The Ministry of 
Agriculture continues to encourage farmers throughout the 
country to grow more rice, offering incentives such as 
lower-priced seeds and low-interest loans from the Myanmar 
Agricultural Bank.  U Kyaw Tin told us that Burma will likely 
have a large surplus in 2009, as farms in the Irrawaddy Delta 
recover from Cyclone Nargis damage and farmers in Northern 
Burma continue to plant and harvest high yields.  Aung Kyaw 
Htoo, SGS Agricultural Specialist, reported that the GOB's 
2009 target was unrealistic, but he too anticipated the rice 
surplus in 2009 will increase significantly to approximately 
one million metric tons, assuming current conditions prevail. 
 
 
¶6.  (C)  U Kyaw Tin told us that in addition to extending the 
validity of the 10 remaining rice permits, the GOB will issue 
additional rice export permits in January and February.  If 
world commodity prices continue to increase (Burmese rice 
prices rose from USD 280 to USD 300 during the last week in 
December), more traders will export rice.  U Kyaw Tin 
predicted that private Burmese traders could export as much 
 
RANGOON 00000001  003.2 OF 003 
 
 
as 500,000 metric tons of rice by April 1; MEC levels could 
be roughly the same.  Depending on the yields of the November 
2009 crop, 2009 private exports could be as much as 750,000 
metric tons, Aung Kyaw Htoo predicted. 
 
¶7.  (C)  Even if rice production and surpluses increase as 
foreseen, Burma faces an additional constraint on exports -- 
the lack of infrastructure to process and ship a 
significantly increased quantity of rice, U Kyaw Tin 
commented.  Many of Burma's premier rice mills were destroyed 
by Nargis; reconstruction will take time.  Additionally, the 
GOB continues to prevent the movement of rice between states 
and divisions, only allowing selected crony companies to move 
rice from Northern Burma for export.  As U Kyaw Tin noted, 
before it can export large volumes, the Burmese Government 
would need to build new roads, improve cargo storage 
facilities at the Port of Rangoon, and invest in new rice 
mills -- none of which it currently plans to do. 
 
 
VAJDA