R 021425Z FEB 09
FM AMEMBASSY OUAGADOUGOU
TO SECSTATE WASHDC 4583
INFO DEPT OF TREASURY WASH DC
DEPT OF COMMERCE WASHDC
MILLENNIUM CHALLENGE CORP
ECOWAS COLLECTIVE

UNCLAS OUAGADOUGOU 000047 
 
 
ACCRA FOR USAID WEST AFRICA 
DAKAR FOR USAID FOOD FOR PEACE AND OFDA 
DAKAR FOR FAS 
DEPT PASS TO USAID FOR AFR/DP 
STATE FOR AF/W 
 
SENSITVE 
 
E.O. 12958: N/A 
TAGS: SOCI EAID AMED PGOV UV
SUBJECT: BURKINA FASO: DESPITE RECORD HARVEST CEREAL 
PRICES CONTINUE TO SOAR 
 
REF: A) 08 Ouagadougou 424; B) 08 Ouagadougou 439; C) 08 
Ouagadougou 1024 
 
 
¶1. (SBU) Summary: Although Burkina Faso recorded good 
harvests during the 2008-09 agricultural campaign, cereal 
prices in local markets remain at record levels.  Burkina 
Faso produces the bulk of its cereal needs, approximately 
3.5 million metric tons, and imports small amounts of 
rice and wheat.  Local cereal merchants and farmers' 
associations claim that demand from neighboring countries 
has dramatically impacted prices, while critics claim 
that farmer stockpiling is also responsible for the 
problem.  With food prices rising or remaining at 
inflated levels, the Government of Burkina Faso (GOBF) 
recently met with producers, intermediaries, and other 
stakeholders to address this potentially grave issue. 
The government appears committed to a free-market system 
despite concerns that if cereal prices do not fall, the 
country could again face violent demonstrations. End 
Summary. 
 
 
------------------------------------- 
PRICES BELIE RECORD CEREAL PRODUCTION 
------------------------------------- 
 
¶2. (SBU) Despite a surplus cereal production of more than 
700,000 metric tons for the 2008-09 growing season 
(REFTEL C), Burkina Faso continues to face rising food 
commodity prices.  According to Burkinabe producers, a 
100 kg bag of grain is currently selling for 15,000 CFA 
(US $30); this is twice January 2008 prices, which were 
between 7,000 CFAF (US $14) and 8,000 CFAF (US $16). 
"This situation is unprecedented for the month of 
January." confessed Moussa Dagano, a farmers' association 
representative from Sissili province.  According to 
Dagano, the price of a 100 kg bag of corn increased to US 
$32 in January 2009 from US $15 in November 2008. 
 
¶3. (SBU) Although producers acknowledge that cereal 
prices can be volatile, most agree that 2009 prices are 
abnormally high and that the commodities market is acting 
in an uncharacteristic manner.  In a typical year, prices 
start increasing during the lean period, from August to 
September, and then dramatically decrease after the 
harvest.  Under these conditions, traders may realize 
high speculative profits or losses, depending upon the 
accuracy of their market price expectations.  But this 
year, prices have been above average -- even higher than 
those traditionally found after a bad harvest.  According 
to Afrique Verte, an international organization which 
publishes a monthly on-line commodities survey, December 
and January prices in Burkina Faso increased at an 
unprecedented 20 percent for corn and 14 percent for 
millet and sorghum. 
 
----------------------------------------- 
KEY DETERMINANTS OF CURRENT CEREAL PRICES 
----------------------------------------- 
 
¶4. (SBU) During a January 14 joint meeting, farmers 
association leaders, local grain merchants, and 
government representatives, gave three reasons cited to 
explain the recent price increases: 
 
-- Farmers blamed price increases on buyers from 
neighboring countries like Ghana, Togo, and Ivory Coast, 
who entered the local cereal market at the end of 2008. 
These foreign buyers were willing to pay premium prices 
and consequently both local demand and cereal prices were 
driven up. 
 
-- Instead of selling commodities on the market, farmers 
used surplus cereal production from the 2008 campaign to 
rebuild cereal stocks depleted by the 2007-08 food 
crisis.  Thus, the record 2008 harvest failed to bring 
down prices. For example, on January 15, the government 
daily newspaper, Sidwaya, reported that farmers from the 
Eastern Region claimed that despite a good harvest; they 
have less to sell because the 2008 food crisis depleted 
their stocks to their lowest levels in over 10 years. 
 
-- Government support for cereal crops has historically 
been very weak and needs to improve.  Although cereals 
account for 80 percent of cultivated areas and 70 percent 
of domestic food intake, the GOBF has continued to pour 
millions of dollars into the countryQs failing cotton 
industry and other neglected food crops. (REFTEL B) 
During the January 14 meeting, farmersQ representative, 
Joseph Dagano, acknowledged that although the 2008 
harvest was successful, the government must do more to 
encourage cereal production.  Dagano explained that in 
2008, the government subsidized rice production but 
failed to provide substantial support for other important 
cereal crops such as corn or sorghum. 
 
----------------------------------------- 
HIGH PRICES SPELL OPPORTUNITY FOR FARMERS 
----------------------------------------- 
 
¶5. (SBU) After the 1992 liberalization of the cereals 
market, the GOBF abandoned its financial support and 
encouraged greater private sector participation.  The net 
result was a cereal market chain consisting of small 
farmers, collectors, wholesalers, transporters, 
retailers, and a much smaller group of large traders, who 
also import and export commodities.  Although the cereal 
supply chain can take many different forms, this complex 
system of intermediaries often results in reduced 
producer income.  However, this year many farmers 
circumvented the traditional commodities path and sold 
their crops directly to the highest bidder. 
 
¶6. (SBU) By circumventing the market chain, producers 
were finally able to realize a profit; however, this 
resulted in a cereals shortage and higher prices for 
local consumers.  On January 15, the independent 
newspaper, Le Pays, quoted Denis Zoungrana, a 
spokesperson for cereal vendors, that "they were 
surprised by this unprecedented situation."  According to 
Zoungrana, the cereal shortage generally comes during the 
months of May, June, and July, but this year it arrived 
during the fall harvest season.  He added that following 
the 2008 harvest, vendors began collecting cereals but 
could not find sufficient quantities because buyers from 
neighboring countries had already approached local 
producers and offered them a much better price. 
 
¶7. (SBU) On January 15, Le Pays reported that during 
January 5-8, a mission of the National Company in Charge 
of the Management of National Food Security Stocks 
(SONAGESS) traveled throughout the Cascades Region to 
collect rice for its stockpile.  The mission was stunned 
when farmers refused to provide the promised quantities 
of rice and snubbed a government offer that included 
production subsidies.  According to the article, the 
farmers were not interested in the 115 CFAF (US $0.23) 
per kilogram established by the government when they 
could sell the same quantity of rice for 200 FCFA (US 
$0.40) a kilogram. 
 
--------------------------- 
GOBF SEARCHES FOR SOLUTIONS 
--------------------------- 
 
¶8. (SBU) The GOBF quickly realized the severity of the 
issue and called a joint meeting on January 14, for 
farmers, local cereal traders, and other stakeholders. 
During this meeting, Minister of Agriculture, Laurant 
Sedego, pointed out that the government was deeply 
concerned about skyrocketing commodities prices, which 
occurred despite a successful 2008-09 agricultural 
campaign.  Minister of Trade, Mamadou Sanou, described 
the food security situation in Burkina Faso as 
"worrisome" and warned farmers that, "if these trends 
continue and cereal prices do not come down, we are going 
to have a repeat of the social unrest seen in 2008 
(REFTEL A). This is not good for the country; we need to 
safeguard peace." 
 
¶9. (SBU) The general consensus during the January 14 
meeting was that immediate action must be taken to 
diminish the economic impact of price increases. 
Soumabere Dioma, President of Burkina FasoQs Inter- 
professional Cereal Committee (CICB), suggested that the 
government launch an awareness campaign urging farmers to 
release part of their stocks onto the market.  He also 
suggested that the GOBF conduct a survey to assess the 
root causes of the price increases and to purchase grain 
to supplement depleted national stockpiles. 
 
¶10. (SBU) Although some consumers have called for 
government controls on cereal prices, the GOBF is 
standing firm on its promise that it will not interfere 
in the commodities market.  During the January 14 
meeting, Minister Sanou stated that, "the GOBF supports a 
free market system and will not engage in price fixing." 
Moreover, Sanou explained that Burkina Faso would not 
prevent grain from leaving the country because it agreed 
to allow free movement of people and goods within the 
West African Economic and Monetary Union (WAEMU) and 
Economic Community of West African States (ECOWAS). 
Sanou added that the GOBF is avoiding strong-arm tactics, 
choosing instead to encourage farmers to increase their 
production levels and to act in the best interests of the 
country. 
 
¶11. (SBU) To ensure cereal availability in local markets, 
the GOBF is encouraging farmers to sell their stockpiles 
and is promising production subsidies over and above 
those of last year.  During the January 14 meeting, 
Minister Sedogo assured farmers and cereal traders that 
"the government is going to renew last yearQs subsidies, 
and even improve them."  In addition to encouraging 
production, the GOBF is also taking preventive measures 
that would enable it to sell commodities at "social" 
prices similar to those offered during the 2008 crisis 
(REFTEL B).  On January 21, the GOBF, through SONAGESS, 
published several invitations of tender in the daily 
newspapers lQObservateur Paalga and Le Pays, for the 
purchase of 30,108 metric tons of cereals. 
 
¶12. (SBU) Comment: If left unchecked, skyrocketing 
commodity prices could undermine development efforts by 
causing poor households and even small farmers, who are 
also often consumers, to fall even deeper into poverty. 
The USG should continue to support the GOBF in its 
efforts to maintain a free-market system in the face of 
intense financial pressures.  USG programs that promote 
regional food security will continue to be a key factor 
in determining whether the GOBF will be successful. In 
order to improve current conditions, the GOBF needs to 
provide technical and financial assistance that will 
increase cereal production, improve access to timely 
market information, expand transportation corridors, and 
build emergency stockpiles to stabilize prices during 
supply shortages. 
 
LOCKARD