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Wheat, sugar, and rice import prices fall, but trader gross profit margins can exceed 100%
View(s):By Kapila Bandara
Import prices of three food commodities deemed essential for Sri Lankans, rice, sugar and wheat flour, have dropped in US dollar terms and rupee terms, but traders are carving out gross profit margins above 100% from some of them.
This means that for a daily-wage plantation worker family, roti and black tea remain a luxury.
The drop in import prices of sugar and wheat in particular, appears to mirror a fall in global benchmark prices.
The gross profit margin (percentage of revenue after accounting for direct costs) on wheat grain in February 2024 was above 108.43% and that of wheat flour was 92.94%.
As a financial metric, gross profit margin is a crucial indicator of core profit and one way to improve it is to inflate prices.
In February last year, the cost, insurance and freight basis price per kilo of wheat flour was Rs 118.21, based on Sri Lanka Customs data, but the retail price was Rs 211.15/kg, as logged by the Hector Kobbekaduwa Agrarian Research and Training Institute. The gross profit margin was 92.94%.
Six months later, in September 2024, wheat flour CIF price was lower at Rs 115.38/kg and retailed at Rs 191.90/kg. The gross profit margin was 76.52%.
Wheat grain CIF price was Rs 88.11/kg, but at retail a kilo cost Rs 195.71. The gross profit margin — 107.60%.
The import price per metric tonne (1,000 kilos) in December 2024 was lower by 21.4% at Rs 82,253.76 (CIF) versus Rs 104,644.73 in December the year before. In US dollar terms it was down by 11.9% at US$282 from US$320.27 in December 2023.
Gross profit margin on sugar is also substantial.
In September 2024, a kilo was Rs 188.87 (CIF), but retailed at Rs 259. The gross profit margin was 70.13%.
A kilo of sugar in July that year was Rs 196.99 (CIF), but the retail tab was Rs 279.16, propelling the gross profit margin to 82.17%.
In February 2024, the gross profit margin on a kilo at Rs 228.16 (CIF), was 63.10% when it retailed at Rs 291.26. Imports that month were 31,502 MT at a CIF value of Rs 7.187 million.
The price of imported sugar was Rs 180,856 per MT (CIF) in December 2024 versus Rs 257,674 in December 2023, a drop of 29.8% year-on-year. In US dollar terms, the price was down by 21.4% to US$620.05 as against US$788.62 a year ago.
In Pettah, white sugar was sold
at Rs 231 per kilo wholesale in the first week of December, while in Narahenpita, the retail tab was Rs 260. Six days before Christmas, traders in Narahenpita sold
sugar at Rs 250. In reality, retailers dictate prices.
In October 2024, the sugar import price was lower at US$632.02 per MT (CIF) versus US$771.61 in the same month a year before, an 18.1% drop. In rupee terms the price tumbled by 25.9% to Rs 185,678/MT (CIF) from Rs 250,564/MT (CIF) in October 2023.
As for rice, which is protected by tariff and non-tariff barriers, Sri Lanka paid Rs 160,610 (CIF) per MT in December 2024, less than half the price compared with Rs 369,721 in 2023 December, a decline of 56.6%, Central Bank of Sri Lanka data show. In US dollar terms also, the import price more than halved at US$550.64 (CIF) in December last year versus US$1,131.54 (CIF) in 2023 December, a decline of 51.3%.
Compared with year end 2024, rice per MT in October 2024 was sharply higher at US$1,087.08, but lower by 8% from US$1,181.87 a year ago in 2023 October.
A wheat duopoly operates in Sri Lanka and Parliament was told in August 2023, that two companies Prima Ceylon (Pvt) Ltd., and Serendib Flour Mills Pvt Ltd.,
are making large profits from wheat grain imports, while paying just
Rs 3 in taxes.
Until 2001, the price of wheat flour was in the hands of the Cooperative Wholesale Establishment, the sole importer. In 2001, Prima Ceylon, opened by J. R. Jayawardene in 1977, then president who allowed tariff protection, shifted from build-operate-transfer venture to build-own-operate, and it stopped being a contract miller for the then-Chandrika Bandaranaike Kumaratunga administration.
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