Thursday, December 30, 2010

The case against agriculture, in an era of better opportunities- surely not!

It was an extremely difficult year in my agricultural endeavors, and if not for supplementing my income from additional work in Colombo, I could not have made it. It was another year of disappointing harvests, with a fresh round of crises. Upon analysis of this year’s problems, the key was one of lack of discipline and not following specific instructions. This coupled with a severe labor shortage when the need arose, meant a fall in output. It is an eye opener that I was unable to get the required results from the one area I could control. This inability to get to grips with the labor/human resource issue is one that convinces me of the desperate need to elevate agriculture to a different plain with educated, motivated and well remunerated managers who are dedicated to this field. In order to make such a task viable, it is essential to run a much larger establishment with maximum use of mechanization, and use of new capital intensive techniques.

The frustrating part for me is to see how relatively inefficient my neighboring CIC Hingurakgoda Farm of over 1300 acres is, as I cannot use it as a working example to make my point, as the profit per acre from agricultural activities on that property is arguably below mine. In my opinion, one should get a net profit of Rs50K per acre in agriculture in SL after paying for all the costs, (excluding land). So this figure can be compared with the rental for the use of the land. We must use this as a starting point when doing the business plan of agricultural activities, as otherwise the opportunity costs of going into other fields is preferable to working the land.

I can market everything I produce if the quality is consistent and superior, and have failed to get the output directly from my land, and from the outgrowers to supply my customer demand. We must therefore shift away from the perennial problem of the farmer in marketing his produce, but concentrate instead on growing quality as the increasing demand for quality will capture every item of production. The problems that are highlighted of farmers disposing of their produce for lack of a market, can be solved with a little bit of common sense, once storage, transport and logistics are sorted. The greater problem of the shortage of quality is what needs to be urgently addressed before prices go through the roof. Free marketers will say, let the market take its course, when price increases, more of the product will be grown, which will result in a drop, sometimes too much to make it a total loss.

The bottom line on all of this is efficient production at low cost will enable the farmer to wither all price fluctuations which are only temporary. A larger enterprise can be intelligently managed and current risks mitigated by planning. One should not resort to knee jerk moves such as imports to distort the market.

Monday, December 13, 2010

Getting to grips with the Food Production Dilemma – Sri Lankan Problem

We in Sri Lanka have not yet been able to distinguish fact from fiction in the food production dilemma. There was a time, when it was thought that we should not bother with growing any food, as other people can do it better and cheaper, so lets do what it is that we can do better, and effectively let all our agricultural lands go to forest, where we can encourage tourism with the growth in the National Parks!

I am not one to subscribe to that viewpoint, though I do agree that our agricultural practices are inefficient and outmoded. I have belabored this point right through the blog as any reader would notice. So all I am advocating is a complete change in the way we operate, being focused in all we do, and remove as many of the risk factors as possible, because agriculture has the most unknowns in any venture.

The government MUST work with one purpose, without encouraging grape growing for a wine industry, or importing ostriches to increase meat consumption. Such fantasies are by those unaware of the ground situation aka ‘politicians’. We have a lot to learn from the agricultural practices of the plantation industry, as well as those of the outsource success stories of companies like Ceylon Tobacco Company for their management of labor and outgrowers. We must also learn from the past mistakes of large scale agricultural failures that led to the small holder emphasis. This issue demands so many resources and thought put to it that no one appears to have the time or patience to attempt this, least of all politicians.

In my opinion, lets take product by product and have a definite national plan to encourage or discourage as well as the preferred size of operation. It was noticeable that once again, people were encouraged to apply for blocks of land in the Mahaweli zone in 50acre lots for agricultural projects, as if it was some kind of panacea for these ills. We know what happened to the original leases granted thereon, and once all the trees were cut, the top soil eroded, you cannot give this land away free if you wanted to. It is important to have a goal, as to what will be suitable for that land. Then assistance subsidy and sound business plan must accompany this as well as follow up thereon. So many agricultural projects in SL have floundered even with the best of intentions, that only a concerted effort can arrest this likelihood.

Let us begin with paddy production and have a national plan for that. Let us all understand that this plan should encompass all varieties of Paddy and different objectives for high yielding and organic varieties as both have a market, but at different levels. Then understand the workings of the farmer, best practice, work ethic and develop a practical plan, first by selecting an area which can be replicated nationwide if successful. In order to be selected, various criteria must be in place, and then the subsidy and education of the farmers and best planting practices can be implemented. People will say we already have Bathalagoda Rice Research Institute for training and imparting knowledge. If so look why it has failed and look at methods of turning it around. They have recently set up a Rice Research station to advise farmers, but I would like to know who have obtained training, and how much land has been cultivated by them, and see how their yields have improved due to the training, as that is the obvious measure of its success.

Without learning the lessons of the past we can never improve for the future and as a working paddy farmer I can honestly tell you I learn something new every day, and blame the lack of common sense of the farmer for a lot of the ills we are faced.
I have digressed somewhat from the main point of the article, namely to find away out of the mess. By way of example I have highlighted the problem in one instance, but am convinced that there is NO attempt YET at arriving at a comprehensive agricultural policy to match all the suppliers and consumers, and improve productivity as all this will contribute to the growth of the GNP at a far higher pace than simply relying on the service sector to take up the slack.

I firmly believe that this is the key to economic growth that has completely eluded the planners and politicians, one that will directly flow into the hinterlands, if only we can harness sufficient interest. With the hotel sector also growing and willing to pay a premium for quality produce, even they are struggling to get the variety of produce at the exorbitant price they are being asked to pay. We cannot play catch up with supply and demand and wait for that to come to equilibrium. Proactive steps must be taken immediately. I recently read an article where a prominent Buddhist priest was exhorting people to realize the value of growing some of their own food at home in pots or in a small plot, just to mitigate their food cost, and gain an appreciation for quality food and value of agriculture, something that is desperately needed, but which is not the solution to the problem per se.

You only have to go to the Pola at any village to realize how little is grown locally as in local to the village, and how costly the food items are with much having been transported from afar, from dried fish to coconuts. If today’s Rs60/- coconuts are any indicator of the future, we have no idea what we are in for, are we waiting for the coconuts to reach the magic Rs100/-? This to me is the most important task, surpassing the cost of living committee, which are all playing to the gallery. Only an immediate focus on food security and the plan to insure against it will suffice.

Thursday, December 9, 2010

Here we go again with re-imposition of Price Controls on the sale of Rice

Today’s papers announced the establishment of a high powered Cabinet Sub-Committee on Cost of Living, chaired by the President, with 15 Cabinet Ministers and including the Prime Minister. Concurrent to this following on from the import of Chicken and Eggs recently announced, they have imposed price controls on Rice, the single most essential ingredient in the diet of the average person.

One does not stick a bandage each time the wound bleeds, one has to find out why it is still bleeding and try to prevent the causes, like controlling the diabetes!
I have intimate knowledge on Paddy and Rice as I am a farmer who grows more varieties of Paddy than anyone else I know and converts that into multiple varieties of Rice and sell it direct to consumers, so I have both a stake in this subject and an opinion on what needs to be done, without this unforeseen edicts from above.
I know from my area, a lot of paddy was purchased by the state at the guaranteed prices from the last harvest, as the market price was lower. However some of the paddy was substandard, due to moisture levels being higher and were purchased not having regard to basic norms for storage. Now 70,000 Tons of paddy will be released from these stores, to be converted to 45,000 Tons of rice. This will then be issued to the market. I dread to think how much paddy will have to be thrown away due to substandard that may not even be good enough for animal feed, as that is what happens when the paddy spoils it ends up in Chicken Feed.

By imposing price controls on the most popular varieties of rice, the best quality of these will go underground, or the millers will not produce them. In my case, there is no incentive for me to spend the extra money, get the paddy par boiled to a high standard, by a neighbor, so I can sell quality Nadu, that tastes good, and sell at a loss for the Govt regulated Rs60/- a kg. Especially these days with wet weather, sun drying this is out of the question, and the risks associated with getting the required quality are not worth taking when losses result in so doing.

It is typical of leaders who don’t understand supply and demand, who try to control prices and thereby reduce the choice to the consumer, and put the producer in jeopardy, when in fact their whole focus should be to improve productivity, which helps both producer and consumer. A government whose slogans are “rata hadamu, api wawamu” should take heed from a farmer, and not from price controls, that further impoverish the retailer and producer with the real culprit the big miller again set to cash in from the failure to issue paddy from the stores earlier. Why wait till now when prices began rising a month ago, due to non release of paddy stocks by Govt.