Business DINING

RICE: Economic Boom or Bust?

Part XIII:

Bojoon.com and CIC has teamed up to review one of the most controversial debates of Sri Lanka - is rice as an industry worth the effort.

The discussion so far...

Rice as an industry comes under heavy fire as unprofitable notes Dr. Sumith Abeysiriwardena - Senior Consultant Researcher of CIC Agri Businesses. Yet, instead of been abandoned, rice production over the last 6 decades has increased by 12 times!

He points out the tremendous demand for rice, as a grain easy to handle and the only crop for marshy lands. With our technology and unique hydraulic systems our productivity is high and points that history proves rice is both our staple and our stronghold against our many enemies.

While other countries have made a viable export and domestic industry, we have decreased our rice consumption for wheat, making us economically vulnerable. He feels and our neighbors certainly reciprocate his thoughts, that buffer stock provides a good solution to stabilize our staple, especially with unpredictability unique to agriculture.

Managing Directot/CEO Keerthi Kotagama, of Agri Businesses calculates that even with the best estimates, rice shortage is imminent at least at the tail end of year 2008, and a buffer stock is the only solution to address this immediate problem.

Kotagama continues that with increased production of ethanol due to increasing fuel prices and globalization, the world is about to face a severe rice shortage. The intervention programs of our immediate neighbors, though taken with the country’s interests at heart, are causing unintended and long-term repercussions threatening to create a hungrier world.

Conversely, this has provided Sri Lanka a strategic moment that if used right would propel its rice industry to new levels. By developing the export market, Kotagama calculates that the farmer stands to earn a good profit while the local consumer getting his rice at the fair price.

However, he continues the socio-fabric has changed drastically since colonization. While there are advantages with these changes such as ease of social mobility, these are not geared to sustain the intricate projects of the by-gone eras.

The discussion continues:

The modern system has forced people to become introverts in outlook and work towards self-preservation than towards a community, notes Kotagama. The thought has changed from ‘we’ to ‘me’; ‘ours’ to ‘mine’. This change in outlook and thought makes true agricultural projects difficult. Especially crops like rice are a community effort rather than an individual effort.

From an economic angle and from an agricultural perspective, projects like the Mahaweli Project would have benefited vastly had the entire land allocated for paddy cultivation been given to a company than the individual two and a half acre plots given to each family.

By a company, he stresses that he is not referring to a conventional business entity like a private company, but more of an association through which an agricultural community is built.

However, with people placing great value on personal ownership, even a suggestion of such a project is not sustainable to a government.

As a direct result we have an excess labor force that goes wasted. This wastage makes our production very expensive.

He calculates, that to harvest one acre of paddy in six months, sixty man-days are required for cultivation. Therefore, to cultivate two and a half acres, the requirement for one season would be 150 man-days.

In an average farming family, every member is involved in the cultivation process. Considering that an average farming family consists of at least four members, the man-days for a season is: 4 x 30 days x 6 months = 720 man-days. However, only 150 man-days are required to cultivate the two and a half acre plot. Thus, the balance 570 man-days are been wasted.

The small plots results in the farmer not only forgoing economies of scale, but also having to factor this huge wastage component in terms of man-power.

This wastage directly contributes to the farmer’s production costs. This is one reason why the farmer finds it difficult to earn a viable return for his investment.

This situation becomes worse over time with this plot becoming smaller as it gets divided amongst the succeeding generations.

In theory farmer organizations seems like the best possible solution where the farmers instead of owning individual small plots become partners of a larger association cultivating hundreds of acres of rice, instead of the miniscule two and a half acre plot.

This association, besides enjoying economies of scale will also be in a stronger position to negotiate financial packages, credit lines and other banking facilities than the individual farmer.

The farmers, through this association will also be able to break the current oligopoly of the few larger mills and the grip the middlemen are now holding.

However, for a myriad of reasons, what often looks good on paper does not work in reality, observes Kotagama. Thus, while farmer associations seem like the panacea to the problem, it is not.

Join ‘Daily News Business’ next Friday as bojoon.com unravels with CIC many mysteries and misinterpretations surrounding rice cultivation in Sri Lanka. Readers can share your own opinion by dropping an email to [email protected] or by visiting www.bojoon.com.

The writer Sandamalee de Fonseka is the founder of www.bojoon.com that is both the organizer of action-packed one-on-one cooking programs with top chefs of Sri Lanka, and the portal of food in Sri Lanka.

(www.bojoon.com)