* Prices in Yangon soar after cyclone
* U.N. food programme urges donations
* Myanmar defends cyclone response after U.S. criticism
By Aung Hla Tun
YANGON, June 2 (Reuters) - A large "Happy World" sign hangs above a dilapidated food market in Yangon, but on the streets shoppers are far from content.
A month after Cyclone Nargis scythed a path of destruction through Myanmar’s former capital and Irrawaddy delta, leaving 134,000 dead or missing, those spared by the storm are struggling to cope with soaring prices for food and fuel.
"Of course everyone is unhappy, but nobody dares complain," stall-owner Daw Ngee Yee said as her offerings of fruit and vegetables wilted under a hot afternoon sun.
Ordinary life in Myanmar, already tough in one of Asia’s most impoverished nations after 46 years of military rule, has become much harder since the cyclone devastated the country’s rice bowl.
A 50 kg bag of rice now sells for 38,000 kyat, or about $34.50, up from 27,000 kyat before the storm flooded more than one million acres of arable land with seawater.
Peanut oil, used for cooking, has jumped nearly 40 percent to 5,500 kyat for a 2 kg container.
In a country where government workers earn $30 a month or less, people often spend around two thirds of their income to put meals on the table. "The rich are okay, but while prices go up, salaries stay the same. We have to eat smaller meals," 27-year-old Ma Oo said as she inspected tied bunches of vegetable greens at the market.
But Ma Oo, who moved to Yangon two months ago in search of a better life, counts herself lucky to have some food to buy in Yangon where life is slowly getting back to what passed for normal before the cyclone.
FOOD AID APPEAL
Four weeks on, Myanmar’s reclusive junta is gradually and grudgingly opening up to foreign aid and expertise. It has handed out more visas to foreign experts, but access to the delta remains restricted.
The U.N. World Food Programme said it has given 575,000 people their first ration of rice, "but many people have not been reached, and others are now due a second round of distributions."
WFP Executive Director Josette Sheeran said its $70 million food aid programme faced a 64-percent funding shortfall, as did its logistics plan which includes boats, trucks and helicopters.
"With current contributions, we will run out of food by mid-July," Sheeran said after a weekend visit to Myanmar.
With markets back to normal in Yangon, WFP and four NGOs have begun handing out cash, about 50 U.S. cents per person/per day, to help people buy their own food.
That has allowed the WFP to focus on delivering aid to the hardest-hit delta where most food stocks were destroyed and few markets survived the storm.
Authorities have pushed ahead with a campaign, condemned by human rights groups and deemed "unacceptable" by the U.N., of evictions of displaced people from government shelters.
The last camp in Kawhmu, a district south of Yangon, was closed on Monday, witnesses said of the closures which appeared aimed at stopping the "tented" villages from becoming permanent.
"We have nowhere to go and we don’t know any other life except farming and fishing," U Kyi, who fled to the camp with his wife days after the cyclone, said on Friday.
The evictions came on the heels of last week’s official media criticism of foreign donors’ demands for access to the delta, saying that cyclone victims could "stand by themselves".
Under fire for its slow response to the disaster, a junta general insisted on Sunday his government had acted swiftly and it remained open to foreign aid "with no strings attached".
But the patience of Western donors is wearing thin.
U.S. Defense Secretary Robert Gates, who accused the regime of "criminal neglect" and causing more deaths by stonewalling foreign aid, said on Sunday U.S. ships cruising near Myanmar could leave in a "matter of days".
Gates, on a regional tour after attending a security conference in Singapore, discussed Myanmar with Thai Prime Minister Samak Sundaravej in Bangkok on Sunday.
Samak told the Pentagon chief the junta had rejected a big international aid effort partly because the generals feared it could be seen as an invasion, a senior U.S. defense official said.
"That was the clear inference," the official said. "He was not justifying it in any way, he was just saying ‘this is what they tell me’". (Additional reporting by Andrew Gray in BANGKOK) (Writing by Ed Davies; Editing by Darren Schuettler and Jerry Norton)