The perennial problem of paddy prices
When paddy production declines, it is bad news for the country. When paddy production increases it is bad news for paddy farmers. The current record Maha yield is also bad news for the JVP, as paddy farmers, who were promised purchases of their paddy at a reasonable price by the JVP Minister of Agriculture, remain stranded, especially in the North Central Province. Farmers in Polonnaruwa, in particular, have serious grievances that they are unable to dispose of their paddy. Neither the government nor private traders are willing to buy their paddy. Farmers in the Eastern Province are facing a similar plight. Their only good news in the past 12 months has turned sour. Paddy farmers in the main paddy producing areas are facing a severe cost-price squeeze. The costs of production have soared while the purchase price has depressed.

The issue is the familiar one of supply exceeding demand. Yet it is not only local demand for rice and production of paddy that makes up this equation. Imports matter. In 2003 we produced the total requirements of rice and imported only an insignificant 35,000 metric tonnes of rice. In 2004 paddy production fell and we had to import rice. The import of rice though only about 8 per cent of our total supply was excessive. It is the 222,000 metric tonnes of rice that were imported last year that has produced a glut in the market and is the underlying cause of the problem. Perhaps the importers did not expect as good a Maha harvest this year. This year’s production is likely to exceed the country’s need of about 3.1 million metric tonnes of rice or about 150,000 bushels of paddy. We are likely to be more than self-sufficient in rice this year and the carry over stocks from last year are a threat to remunerative producer prices.

The importance of paddy farming for the economy and social fabric of the country requires a long- term vision of its future development. Sri Lanka is a high cost producer by international standards. However the country’s yield levels are relatively high. The Department of Census and Statistics crop cutting surveys revealed yields to be 4.08 metric tonnes per hectare. This is the highest national average yield achieved. The national average however masks wide differences in yields. In the Polonnaruwa area and in the Eastern province yields are as high as 10 metric tonnes per hectare.
On the other hand, in some wet zone areas yields are as low as 2.5 metric tonnes per hectare. Nevertheless, the average national yield level is comparatively high by international comparison. The sustainability of paddy production may well depend on the ability to ensure remunerative prices for paddy. The political problem is that of balancing consumer interests and producer interests. When paddy production falls and rice prices rise, governments tend to import large quantities of rice. Paddy farmers are not given the full benefit of rising prices. There may be also other benefits in importing large quantities of rice.

The vast strides in paddy production in the fifties and sixties was made possible owing to a package of policies that included guaranteed prices for paddy. Consumer interests were taken care of by the subsidised rice ration scheme that operated till 1978. While this option is not available, it is vital that the producer interests are maintained by consistent and certain policies. The government must have a good programme of maintaining stocks, controlling imports and releasing the stocks only gradually and systematically so as to not depress paddy prices. This together with an effective marketing mechanism for paddy purchases could be of benefit to both farmers and consumers.

The overwhelming problem in the implementation of such a programme by the government is corruption. The country is likely to achieve self-sufficiency this year. If the country’s objective is to sustain self-sufficiency in rice, then paddy farmers must be assured of a remunerative price. Wide fluctuations in prices are not conducive to farmers using costly inputs to achieve high yields. Achieving self-sufficiency over the next decade would require increasing yield levels.

This is impractical if prices fall below cost of production. To stabilise paddy prices the government must have a declared import policy for rice that is not altered unpredictably. It must increase storage capacity in the country and intervene effectively in the paddy market when there is a glut in production. The golden grain may lose its lustre among farmers if prices are unpredictable and paddy farming becomes a risky venture.

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