Friday, April 25, 2008

retailers become the scapegoats in the paddy to rice scam

I have tried to show as simply as possible how this recent government price controls on rice and no other commodity that has risen in price, has been for the benefit of the miller primarily, while giving temporary relief to the consumer, but really at the expense of the farmer who the government should encourage to grow more rice.

The real emphasis should be to increase productivity and therefore output, which will automatically result in prices remaining stable. The market mechanism will adjust itself if this is done. I am a rice producer and a very high cost very inefficient producer, as I am stifled by limiting size, fighting with my neighbors for my water entitlement and dealing with land that has been bleached over the years of nutrients, which result in substantial reductions in yield.

A very simple reasoning in farming is to obtain as much yield as possible given the inputs. By increasing inputs such as nutrients and pesticides as well as better farming techniques like deep ploughing and intelligent use of fertilizer and water, specific to the type of seed paddy being used, one can increase yields dramatically more(50%+) than we currently obtain. We must concentrate on why we don’t use these techniques and address those issues, such as land holdings, water rights, practical solutions for expansion of fields, to counteract the contraction now taking place of division by family members from generation to generation. Other factors include title, being able to borrow at reasonable rates of interest for machinery. I have also noted earlier that agricultural advisers should be better trained, with the overall objectives in mind rather than as done today advise people to go into organic farming with no idea what it would do to yield and with no ready market for these outputs, readily available to the farmers.

A short-term solution, namely, price controls are most unhelpful as it has again created uncertainty. This is something no farmer, who deals with more than his fare share of uncertainty, wants. Farming is a career where one day one can obtain very high profits and the next enormous losses, and the ability to withstand this and cushion for hard times is how one can separate the successful against those not so. All steps should be taken to reduce this uncertainty, as one can never eliminate it, and by doing this I am confident that the yield increases demanded from them will come in time. Patience and long term plans are required to succeed along with a VISION.

follow up of the rice price control saga

Paddy is so precious look at part of my stock-piled! by my bed

I am in Minneriya at the moment and heard that the Consumer authority has fined retailers of rice for selling above the maximum price. This is all done for publicity to frighten retailers, and indirectly tell the farmers to release the stocks of paddy they are keeping (in the government parlance hoarding) to sell to the millers. For example Food City chain that sells in over 100 outlets where they have 95% of their rice varieties above the maximum price, was fined Rs150,000/- which is a drop compared to the Rs 10Mill+ a day they get from selling rice at prices higher than the govt. set rate. Smaller retailers have been fined Rs5,000/-

If one speaks to the farmers here in Hingurakgoda and Minneriya their response is that the govt. is doing this to help their ministers who are millers, who hitherto were unable to obtain the quantity of paddy to mill, and that after price controls are able to get the paddy at 20% below the pre price control date, by frightening farmers to sell at lower prices set by the millers.

So now the millers have the ability to stock paddy at lower prices and release them when prices inevitably rise in about a month once the rumpus over price controls dies down. This sadly as noted in the article below penned as the price controls were announced, is just for media publicity that the government is doing something about food prices. All food items have risen on average 80% in a year and no other item is controlled just for this same reason, that there are no politicos to stand to benefit, unlike in the rice issue.

One of my friendly millers told me that even at the higher paddy price before the price controls came into effect, the largest millers will still be able to sell the rice and make a profit at the fixed price, so that they never stood to lose. Now with the lower price of paddy currently they are again in a position to earn mega profits even at the current price. One dreads to think the level of super profits they stand to gain once the price rises and their costs are at today’s prices.

Just for information, today’s price per kg of paddy paid to the farmer is Rs30/- Just before the price controls were announced the farmer sold his kg for Rs40/- so the difference is pure profit for the miller who could sell his rice wholesale at Rs65 with a profit even at paddy at Rs40 for retail at Rs75.

Friday, April 18, 2008

the government has just controlled the price of rice

Just sit back and think this through. In order to control the spiralling price of rice, the government has just fixed the price of the basic varieties of rice. Today's papers said that the Pettah traders have closed their whole sale rice shops. Anyone is free to close their shop if they dont wish to sell their stock. The traders say they bought the rice from millers at highe prices than they are forced to sell, and therefore they prefer to withhold their stock instead of making huge losses in selling at controlled prices.

If this persists there will be a rice shortage and due to unsatiated demand a black market will spring up and the price of rice will shoot up to hitherto unheard of proportions. What is the government logic? in an era of increasing prices.

What I think the government should do is to sell its imported rice at what they claim they can at Rs 50/- then if the consumer switches to this the local price will fall and if the consumer does not like the imported rice the local price will remain. So let market forces prevail.

I am personally affected by this all the way, as I am a farmer who grows rice, I am a buyer of paddy from my neighbours at prevailing market rates, of varieties I do not grow, and I mill and transport fresh rice to my shop and customers and sell them at prices above what the govt has demanded I reduce to. I am not and will not reduce my price to make a loss. In any case the margins I make barely cover my costs, and I am damned if some authority tells me how to run my business. If my customers are not satisfied with my price they are free to go elsewhere.

When I incurr yield losses to by not putting pesticides, I need a higher price to even break even let alone make a profit, so no faceless body can order me to starve just to serve a short term conscience salving exercise amongst a disgruntled consumer.

Time and time again in my blog I have referred to short termism. We will not be in this situation if correct policies were in place to produce more efficiently and productively. I have mentioned that with very few policy changes such as land use and permitting larger units, our unit cost reductions and yield increases can be dramatic. If these had been in place such a situation will not arise. We must therefore not take it out on the farmer and trader, but the real culprits, the government backed millers who have the most to gain by storing and profiting from paddy.

Remember the government talks about hoarding rice. That is possible to a very small extent by traders, but storing paddy that can be kept for long instead of rice which is a perishable, is done by the government backed millers who should be the people to go after. They only manipulate the price of rice not traders.

I have noted this earlier, that our farmers are now hoarding their paddy to get a better price, and the millers are upset at having to pay more. With this government edict, they force farmers to cut their prices to millers who will in the end hoard the stock to raise the price and the farmer who just saw the light at the end of the tunnel is again cheated by a silly ruling that in reality cannot last much longer in practice.

So any lawyer who wants to challenge this gazette notification I will offer myself as the sacrificial lamb to save the farmer from further insult, when he just thought he may finally be able to earn a meager living from farming.

Friday, April 11, 2008

over half the rice is consumed close to where it is grown

I recently read this fact about Sri Lanka, where most of the paddy is consumed within 8 kilometers from where it is grown. We need to deduce some important points from this. As rice farming is still primarily a very labor intensive and subsistence farming crop, the farmer and his family consume a lot of what he grows. The village rice mill caters to the milling of this paddy, much of which is parboiled at home and brought to the mill and taken back for home consumption.

Another note of interest is that the farmer keeps some of the paddy for home consumption, and so he is more likely to grow only the type of paddy he eats and not which can make him a bigger profit. I notice that in my area only white rice is grown as only that rice is consumed.

It is obvious to me that all three meals of the day consist of rice as the staple and the amount of rice consumed is quite substantial as it forms 90% of a meal’s bulk and for those working in the fields this provides the carbohydrate required. It is also interesting to note that as fewer and fewer women work in the fields, finding other forms of occupation, they tend to be on the heavy side, due to a large intake of rice with little exercise to shed it.

With the ever increasing price of rice the monetary value of the rice consumed rises and a farmer will not change his rice eating to accommodate a price rise, and proudly says that his duty is to grow sufficient rice to feed his family and that only a surplus will be sold.

I had manioc for breakfast and all my staff had heaped plates of rice. The pol-sambol was from the freshly scraped coconut in the land, and at today’s prices a great benefit to them as I provide all the meals. My effective cost therefore is soaring.

We as a county cannot afford to eat three rice meals a day, and we should try and find nutritious alternatives. Of course manioc and sweet potato that grow on even the most marginal lands is more nutritious, but it appears old habits die-hard. It is important that the powers who extol the virtues of eating rice, should instead get the nation to grow manioc, which I believe is the easiest crop to plant with hardly any care and the resultant food can be substituted for breakfast. After all food and taste is all about habit and preference. Nutrition is what matters.

'jinasenas you can do a lot better'

Yesterday, I bought a double plough for my 12horse power Jinasena Agrimec tractor. I purchased it in Dambulla as that was the only place that stocked one, ploughs apparently being very rarely sold these days.

The salesman said if I was living in the area he will be able to show me how to fix it, as it is not very easy to do. I was surprised there was no sheet giving instructions, preferably in Sinhala about how to fit it.

The instruction sheet can then give information about the various terrains the plough can be used in and what other specifics are required like the rear wheel and the ploughing wheels if different, but sadly zilch was given.

I got a local boy to help me fix it as I did not know where to start, and he somehow struggled to do it. However we discovered we did not have the needed tools to fit it and also all the required nuts were not there.

My intention was to start ploughing my fields as soon as possible, but due to the lack of good service from the seller of the agricultural equipment, I waste a lot of learning time and also making mistakes. A company that prides itself on making products due to the expertise of the engineers they employ should also cover the end user by sending those very same engineers to the field to see how those machines are used and the problems encountered in the fields with putting it together in real conditions rather than a factory situation.

This is not the first time I have had problems with their service, as I am still awaiting a replacement wheel for the tractor, which was faulty when in was delivered. In addition there is not casing for the removed rotavator, so that the plough can be fixed and I have also had a whole host of other issues that I have not been able to satisfactorily resolve with their service people. They don’t realize that for a farmer service is what sells a product and bad service means that other farmers getting to know this will definitely not buy one of their products as a result.

I have still not got it to work and do a task, which should have only taken a day, and we are struggling to get it to work the way it should. So please speak with your customers and address their concerns by coming to the site, so you can serve us better. The appalling service stands out time and again.

history of large scale farming

I am in the process of coming up with a proposal of how best Sri Lanka can improve total agricultural production, while improving yield in an era where the numbers remaining in farming is steadily dropping.

When I talk about large scale farming, I immediately hit the obstacle “we did it and it failed miserably and people lost a fortune”. Even as far back as the 1920s a large farming project in Minneriya, which predated the colonization schemes, failed miserably for a myriad of reasons. These were either company owned or corporative, not individually owned.

We need to have a fresh approach given a changed situation, where employment is no longer the objective, but yield, and unit cost reduction in an environment where the market for the product is there for the long term. Sri Lanka’s problem re exports is the lack of volume to fill orders not the lack of orders. Increased output is therefore essential of such items.

One significant reason given by those who did large scale farming in the past, was that once the economy was opened up, the flood of cheap imports made their products uncompetitive in the domestically, so they closed down. With the current open economy, this stigma will not exist as the evaluation will expect that local industries will not be protected.

One area touted for large-scale farming is the sugar cane plantations, to feed the mills. Whilst Sri Lanka imports 80% of its sugar requirement, the local producer can now manufacture competitively as he has found a niche in the higher value cane and brown sugar segment. Their main problem is the shortage of raw material, which they now receive from the outgrowers.

Again we come to the question of lack of inputs to run the factories efficiently. They are running considerably below capacity. The more raw material the factories can get the lower the cost of production and the greater the attraction for the domestic sugar industry. A lot of money has been spent on this project in the past before it failed, and now there are people trying to resurrect it due to changed circumstances, as the cane has many more uses than just producing molasses from which sugar is refined.

There were many schemes in the 1960s such as the Ceylon Tobacco Company scheme in Maha Illupulama to farm large tracts that were opened for agriculture. Somehow these sorghum and maize and other crops failed, presumably because the costs of production exceeded imported prices.

While there is no question that we are a very inefficient and expensive producer, with ever increasing labor costs, the only way is to drastically improve our methods of production to obtain better yields by the use of new technology including mechanical means. World market prices of foodstuffs have risen and will continue to rise. We have no other option but to produce a greater proportion of our needs domestically.

We must have a vision of the future and act according to that in these changed circumstances. 2008 will go down in history as the year that changed the food and agricultural dynamics globally, and the countries that are able to react to that positively and sooner, will be the winners.

In Sri Lanka, we have traditional export crops such as tea, where we can remain the world leaders in quality, commanding premium prices, as we cannot compete on cost. In rubber, we can increase land under cultivation and obtain carbon credits as it is the plant with the greatest conversion of emissions to oxygen. Emphasis on coconut production is required for domestic consumption that will continue to rise. We will have to produce more oil for local consumption as an import substitution.

We should be a net exporter of rice, when we increase our yields, as we have quality varieties of rice that have a niche and command a high price. Sugar cane will be needed both for carbon credits and food as well as alternative fuels. We can expand the corn production to feed the livestock. We now import most of the chicken feed, and the increasing costs make local production essential.

Increased milk production is a priority, to have a nation of children who are at least given a glass of milk in schools, as in the past, so they get basic nutrients for growth both physical and mental. We just need to improve the quality of the animal stock and plant high quality grasses, and make it worthwhile for people to rear cattle once again for milk as in the past.

The summary above forcefully demonstrates the urgency of getting our basics and priorities in order to lay the foundation within the means at our disposal as we already have the land, cleared but not cultivated to obtain the best from the soil and place specific conditions with minimal extra effort.

larger cultivated extents will increase productivity and yield

As I continue to struggle like a subsistence farmer almost mirroring what he has to face, with a few exceptions, where I use paid labor and have additional cost as a result and sell direct to consumers, balancing this cost with additional revenue.

It is clear as I daily face productive richer farmers and poorer subsistence farmers and am more able to analyze what is wrong and what I believe should be done to achieve the objectives we have set ourselves.

It is firstly most important to get some myths out of the debate. We should not concentrate on trying to help the subsistence farmer, as that is a state that no one can survive for too long. All we do is perpetuate his misery, and for him like the Japanese small case rice farmer this is just a supplementary source of income with his main job being something else.

In order to improve the efficiency of the entrepreneurial farmers, we must also take out the previous concern of him exploiting landless labor, who the theory went should be given land. That is not the case today. There is nothing wrong with being landless as land is no longer a right nor a passport to wealth or success, but instead a noose around ones neck to prevent a more practical vision oriented approach. Do not forget the reasons one is landless is also many and if future free land is on offer they will make sure they are landless by even selling land!!!

Once we determine we must be more productive, efficient in our techniques and require to produce more of what we eat, as being the objectives, goals or vision, then we need to give the persons most able to achieve this objective the means and access. For this there are many factors and just by way of example, the land laws should be altered to allow consolidation with existing owners, assured of a fair rental in that process. Others include bank loans and agricultural technology, including new seed varieties compatible to the area and other technical assistance to improve yields. This approach needs balancing with reference to environmental issues so that yield improvements are not at an unacceptable cost.

Taking a few willing farmers from each area and using them as the initial guinea pigs to show by way of example to others what can be done if certain practices are changed, is a way to begin.

Monday, April 7, 2008

'i can see clearly now the rain is gone'

The recent rains meant there was a very short window when the paddy could be cut and stashed in piles for the ‘Tsunami’ as the large threshing machines are known to thresh. Due to this short cutting window, there was a shortage of labor to cut the paddy, and accordingly the rates charged went up significantly. Using contract labor to cut and heap in one area ran at about Rs7000/- per acre. The ‘Tsunami’ costs about Rs3000/- an hour, and roughly an acre can be threshed in an hour of the paddy is dry and longer if wet.

I used a small machine, about the size of a two-wheel tractor that cut the paddy and partially threshed into bags instead of getting people to cut and then using the ‘Tsunami’. This cost me Rs 6000/- an acre, but I had to then clean the threshed paddy using a borrowed tractor and blower, which is not necessary with the Tsunami which cleans also.

If I were to make a forecast, labor is going to be more costly and difficult in the future so the answer lies in one of the two machines currently available, namely the two wheeled Kubota that cuts and partially threshes and the other a combine harvester like Kubotas that cuts, threshes, and bags and is on chain tracks. The Tsunami will become obsolete in a few years, with the costs of labor spiraling even if there are people available to cut the paddy.

The big combine harvesters are over Rs 3 million, so they will be gradually introduced into the market by the wealthier farmers, while the cheaper two wheeled cutting and threshing machines will become common.

In order to complement these smaller machines, and avoid the use of a tractor with the blower, ‘hulang gahanawa’ it would be appropriate to see someone come up with a small contraption, that can be fitted to a hand tractor instead of the current blower, where the paddy will be put in one end and the cleaned paddy come out at the other speeding up the cleaning job.

I don’t expect this to cost more than Rs 30,000, which can then be brought by the operator to clean, which currently is done not just with the tractor, and fitted fan, but with about 4 people assisting in the process and the attendant costs. I used this system within last few weeks so am speaking out of experience and expressing a wish to speed up and reduce the cleaning process. Let me know if there is such a unit and how I could obtain one.

Friday, April 4, 2008

the village headman is still alive and well

The ‘gammuladaniya’ or village headman position was abolished decades ago. This was where each village has a leader who effectively controls the village (lord of the manor) and this position is hereditary passing from father to son. There were benefits and responsibilities but the benefits far outweighed them. This feudal obeisance has now been transferred.

In my opinion, these positions are now taken by two persons, the Grama Niladari, usually not a person from the village, but whose office is in the village, and this is now a political position; the other by the village moneylender, who by default or cunning is able to always lend money and other items, such as tractors, modes of transport to the villager if he or she wants it.

Both these people take full advantage of their positions, the former, by accepting direct or indirect bribes for official documents, to verify identity for identity cards, confirmation of residence for police reports and other employment related favors; the latter of course by favorable business transactions. These include people in the village duty bound to sell all paddy harvest to him, as otherwise in a future time, the farmer is unable to transport the paddy, he would not come to his help. Others may include the ownership of the only threshing machine in the village, and so all the threshing has to be done by him. They usually threaten people from outside, not permitting them to bring their threshing machines into the village, even in a crisis when like now everyone needed to thresh at the same time when the sun came out after weeks of rain.

These people are at the heart of the insoluble problem in Sinhala villages of not wanting to see your neighbor rise up, and constantly trying to prevent this, as it could upset the pecking order.

How can we empower the villager to get over this, and being less dependant on this person? One practical way is by providing some competition to the existing status quo. Depoliticizing the position and giving strict term limits or transferring them thereby not letting them get too familiar and powerful. The money-lender is compromised when banks help villagers with soft loans to improve their situation, but the trick is to lend to what one would consider the most reliable section. If they are able to show by example the problem is they may emulate or better the existing moneylender at the same game!!

the clash of science and tradition

I have been in this venture of peasant farming for over three years now and I am convinced that in small scale agriculture, there is an art as well as science that needs to blend to make it practical and sustainable.

Just like the way ayurvedic medicine and western medicine are now coming into some sort of accommodation, so must the agricultural equivalents. Those out of University and Agricultural colleges, coming as advisers to farmers come head to head with some traditional methods that rural farmers use and often come into confrontation in the sense of not being able to convince the farmer of how to solve a problem or advise on what to grow.

I know the day and time of planting a certain crop, affects its output tremendously. The particular soil conditioning and the specifics of terrain, direction of sunlight, surrounding growth, crop rotation, also affect pests, yield and weed infestations.

Now the Almanac (litha) is a further factor to take into account, as crops are grouped into certain categories, and only certain types can be planted on certain times, the phase of the moon also determines whether a plant will grow and whether pests will or will not affect the crop. All this must sound complete anathema to the purist, which I thought I was when I came into this but now I am convinced of the merit of these learned the hard way by my own mistakes.

I reconcile this as follows; the large-scale intensive agriculture will usually be successful because everything is scientifically done, including the use of hy-brid seed and the technical and mechanical methods used in planting. That is how India is able to produce onions at a fraction of the cost we incur. They have developed high yielding seeds and perfected the techniques and the land area used is far greater than ours for this crop.

In Sri Lanka 90% of agriculture is in the small scale less than two hectare extent, farmed by individuals or families, with multi crops like mine, and for this type of farming where costs of production are necessarily very high, the use of the traditional methods definitely mean less risk in terms of likelihood of crop failure, due to pests, weather etc. The Agriculture Department is now recommending the use of organic fertilizer as well as more traditional seed varieties that do better under these conditions, so this method is congruent with their direction too. I fear a drop in yield.

The increase in chemical fertilizer costs as well as pesticides, which reflect to an extent the increase in the world oil price, must necessarily mean we have no alternative but to go in this direction. Only large land tracts using mechanical methods can use the high yielding and high intensive methods, which have to be used to get high outputs. This is also a direction we have to go in if we are not to be short of the total requirement, which cannot be met by the large number of small-scale plots.

The future must be a picture where there will be fewer farmers, therefore individual plots will get bigger, and the high intensive methods can yield the desired results. Those still in the small-scale sector have no option but to use the traditional methods and obtain markets and prices commensurate with their output. For this to happen in a practical sense, there has to be a price differential acceptable to the consumer for the smaller to survive.

For example, the hybrid bitter gourd from Thailand has a high yield with intensive use of chemical fertilizer and pesticides resulting in large heavy gourds. The traditional variety, which I grow is small (more in demand from my customers but unwilling to accept a much higher price) and often has pest infestations, resulting in a high level of wastage, but for which the market price is less than the other. If the price is higher, reflecting the higher cost then it maybe worthwhile for me to grow it. I have now decided it is too expensive to grow as the return is less than cost.

A 15kg gunny of Pakistan potatoes for my shop was Rs 40/- a kg, and the price of the local variety, akin to new potatoes was Rs 60/- a kg and the bag was 50kg, which I did not buy, as my profit margin would be greater with the former. The Pakistan potato farms are huge (over 100 acres each) using mechanical means, while our potato farms in the Nuwera Eliya area are tiny(averaging less than quarter acre) using hybrid seeds and intensive use of fertilizer and pesticides. My recommendations of traditional methods will not work with potato as this is foreign, being alien to our shores and so we have to use a substitute instead, which then is a different product and may not be acceptable to the consumer in the short term.

The above illustrations highlight two different issues, both of which need to be considered in any comprehensive plan for food production.