US embassy cable - 03ANKARA6215

UNCLAS SECTION 01 OF 02 ANKARA 006215 
 
SIPDIS 
 
 
SENSITIVE 
 
 
DEPT PASS USTR FOR WHITE 
DEPT FOR EB/TPP, AND EUR/SE 
USDA FOR FAS FOR ITP/MACKE, HANSEN, CMP/LEE 
G&F/RIEMENSCHNEIDER 
GENEVA FOR AGRICULTURE 
 
 
E.O. 12958: N/A 
TAGS: ETRD, EAGR, TU, USTR 
SUBJECT: GOT Extends Rice Import Moratorium 
 
Sensitive but Unclassified.  Not for Internet Distribution. 
 
 
1.   (SBU)  Summary: The Government of Turkey (GOT) extended 
its moratorium on rice import licenses for another six 
months till March 2004.  The Turkish Press is suggesting 
that importers requested the ban in order to force domestic 
prices higher and earn windfall profits.  More likely, with 
upcoming elections the GOT is looking to increase prices for 
domestic rice farmers and circumvent IMF/World Bank 
requirements by not providing direct subsidies or increasing 
support prices.  The GOT as usual failed to provide any 
official notice on the moratorium either to foreign 
embassies or the WTO.  End Summary. 
 
 
---------------------- 
Newspaper Announcement 
---------------------- 
2. (SBU) On October 1, Turkish newspaper articles reported 
that the Ministry of Agriculture and Rural Affairs (MARA) 
had extended its moratorium on rice import licenses until 
March 2004 - February 1, 2004 for paddy rice and March 1, 
2004 for milled rice. This is the first time the moratorium 
has been extended to such a late date.  For the past three 
years, the GOT stopped issuing rice import licenses between 
August 1 and October 15 until most of the Turkish rice 
harvest had been completed.  Turkish importers, however, 
knowing the moratorium would be implemented normally 
imported larger quantities prior to August in order to 
ensure sufficient supplies during the three-month ban.  This 
year, for example, importers bought approximately 80 TMT of 
rice just prior to August. 
 
 
-------------- 
The Blame Game 
-------------- 
 
 
3.  (SBU) The article criticized importers as being 
responsible for the moratorium extension.  According to the 
article, importers bought large quantities prior to August 
and requested the GOT to extend the moratorium.  The article 
accused importers of seeking windfall profits from the 
moratorium.  The article claimed that prior to August 2003 
Turkish milled rice prices were USD 450 a ton but increased 
to USD 580 a ton after the moratorium was implemented.  We 
contacted two of the largest importers of rice who scoffed 
at the accusations noting that prices actually fell during 
the first part of August. 
 
 
--------------------------- 
Impact on U.S Trade - Minor 
--------------------------- 
 
 
4. (SBU) Importers commented that the moratorium on import 
licenses would probably have little effect on U.S. rice 
exports to Turkey.  First, with weather conditions in 
California delaying the rice harvest, California rice will 
most likely not be available for export until November or 
December.  Second, tight rice supplies in the United States 
will make it difficult to source rice from the United 
States.  According to the importers, U.S. imported prices 
for Calrose rice is approximately $800 - $850 ton. 
On Turkey's domestic market, Calrose prices are $700 - $750 
per ton. 
 
 
------------------- 
The Egypt Wild Card 
------------------- 
 
 
5. (SBU) Importers noted that ban would be more effective 
against lower-priced Egyptian rice currently being offered 
at USD 250 - USD 320 a ton.  Given the tight U.S. market, 
more Egyptian rice would be the more likely option to fill 
any shortfall.  Even if the ban is lifted in early 2004, 
importers don't expect much U.S. rice to even be available 
for purchase. 
 
 
----------------- 
Elections Looming 
----------------- 
 
 
6. (SBU) The more reasonable explanation to the extended 
moratorium is domestic politics.  With elections on the 
horizon, MARA officials are looking to provide some 
assistance to local Turkish rice producers.  Given the lack 
of GOT funds available and IMF/World Bank restrictions on 
domestic support programs, the GOT can raise domestic prices 
only by restricting supplies and imports. The GOT has used 
similar practices in the past to support Turkish wheat 
farmers (restricting import licenses) as well as corn, and 
edible oil producers (higher duties). 
 
 
--------------------- 
Is the Sky the Limit? 
--------------------- 
 
 
7. (SBU) As a result of the moratorium, experts believe 
domestic rice prices will rise as Ramadan approaches. 
Officials are counting on a large domestic crop.  However, 
industry officials who are currently purchasing domestic 
rice, contend that the domestic crop will not be as large as 
officials hope.  As a result, we may see a repeat of 2002 
when prices increases so drastically during Ramadan that the 
Turkish Grain Board was forced to import rice to reduce 
prices.  If this should occur again, the GOT may be forced 
to lift the moratorium. 
 
 
--------------------------- 
Comment:  Same Old Same Old 
--------------------------- 
 
 
8. (SBU) The extended moratorium on rice import licenses is 
most likely driven by domestic politics rather than importer 
greed.  Prior to elections, the GOT has repeatedly tried to 
curry the favor of its agriculture producers and rural 
population who represent 40% of the population.  Most 
agriculture producers expect some form of support from the 
government.  The GOT has become very creative in 
circumventing IFI requirements by increasing prices by 
restricting supplies through tariffs or licensing.  As is 
usual, the moratorium was initially announced by internal 
memorandum with no official notification to foreign 
embassies or the WTO.  Unfortunately, as is the case with 
most GOT intervention into the agriculture market, Turkish 
consumers will bear the brunt of the added costs and in the 
end the GOT may still be forced to import rice at an 
inconvenient time if prices increase too much. 
 
 
Edelman