Agri sector production to increase - Heraymila

Sanjeevi JAYASURIYA

The country's agricultural sector is well poised to become a major contributor in GDP growth in the coming years.

Agriculture production has recovered from a soft patch in 2009. The Southern Oscillation Index (SOI) has increased significantly over the past year, with La Nina weather pattern now established, the quarterly issue of Heraymila Securities Limited said.

While a higher SOI value is typically associated with increased agriculture production, at extremes the relationship is weaker. Recent floods may reduce agriculture production in the first half of 2011.

The report further said the recent heavy flooding in Sri Lanka will disrupt economic activity, particularly agricultural production, but could make a come back with much needed infrastructure investment. However the full extent of damage and ramifications are not yet clear, it said.

Agriculture production will continue to increase in the long-term with previously unused and under-utilized land in the Northern and Eastern regions.

The escalating global commodity prices may boost farm production and profitability. This should flow through to higher farms spending and investment. The Government price controls on food prices may mute the pass through of global prices to the rural economy.

Some of the commodity price gains may be offset by another round of wage negotiations held in April this year. Wages rose by 40 percent in 2009 and sharply reduced plantation profits, the report said.