Monday, April 16, 2012

The Rice Farmer – it is not an option anymore!!! if that is all you are



There is no profit in growing paddy on an acreage that is less than 5 acres which comprise, 70% of the paddy land grown today. So REMEMBER the rice we eat is grown by people making a sacrifice!!! For no gain, not even enough to pay for a daily wage of Rs200. So what does the future hold?

I spent the best part of today, going through a file of Newspaper clippings of the farmers’ plight throughout the land this year, on not obtaining a fair price for their produce, with various calculations about the cost of production. It also shows in contrast, the costs rising steeply since 2005, whilst the guaranteed price from the state has not changed in this same period. They are clamoring for the Govt. to raise the minimum price to Rs40. The reality is at that price are we asking the state to suffer a loss on account of the farmer. The market price WILL NOT rise if the Govt. raises its price due to the surplus and due to people prepared to undercut as the state is unable to absorb all the surplus at that price, let alone even at the current price, where the state only purchases less than 10% of the harvest.

It is moot about the guaranteed price as in this season due to the surplus, most farmers had to dispose of their harvest at a lot less than this price. I am a paddy farmer so I know the pros and cons. And I also know that I have bought paddy a few years ago when we had a shortage, at prices at least 50% above the guaranteed price. So then it was viable at that price, and then we treated the guaranteed price as a floor or safety valve, where if the market price is higher, no farmer worth his marbles will sell to the state!!

The reality, in a period of shortage, farmers will not complain about price, in a period of surplus prices are rock bottom. Costs in the meantime continue to escalate. Is it any wonder if they just stop farming? The clamor for the state to pay Rs40 is because the relative cost increase and when compared with other costs, the price of rice is too low. A kg of paddy commands the same price as a bulath vita they say, when in few years ago you could buy 4 bulath vita with it!! In addition if one says the Govt. cannot spend money buying the paddy at higher prices, then the argument is that the Govt. is wasting huge sums on wasted PR exercises such as Dayata Kirula for personal glory of the administration at the expense of the people.

If one takes the example of Japan, the price of rice in Japan is about 5 times the world market price, as the Govt. has made a policy decision to assist the small rice farmer in Japan who farms small plots to stay in business by guaranteeing a price and holding this price at retail level, charging a very high tax on imports. Unlike Japan, where less than 4% are farmers, we in Sri Lanka are an agricultural nation still, and to improve productivity before we save all the marginal farmers from extinction, we have to determine what the policy should be.

Should we encourage larger lost sizes, as it is inevitable, when fewer people go into farming? I believe YES. We must change the land holding laws, and stop distributing land to landless people, except a max of 8 perches for a home. We MUST encourage professional farmers using latest technology to maximize yields. The small uneconomical farmer will disappear and will find alternative employment where they WILL BE better off. Until yields improve we will see this cry for a better price.

Yes it is true that in relative terms the price of rice has fallen substantially, and it should realistically be 50% higher. The Govt. does not intend to pass this on to the consumer as they are acutely aware of the other price increases the consumer has had to bear today, and adding rice to this will further turn them to bread, a lose lose alternative in a period of surplus.

The current argument goes that a family meal with a KG of rice will cost Rs60 and three loaves of bread the substitute will be Rs165, so it is fair to increase this to say Rs80, so both producer and consumer can be in balance!!!

If the price increases to Rs40 for paddy, it must also be remembered that the efficient producers of paddy will increase production. It called profit motive, and so the surplus will grow not fall. The hard decision whether to let the marginal fail is the political hot potato!!!

My contention is that we have skewed data of who this marginal population is. I do not believe anyone can survive on one and a half acres of paddy, let alone bring up a family of 4. So even today those who call for an increase only rely on paddy for less than 30% of income except for a small minority who we should identify and assist by other means.

In either scenario, before any of these are even contemplated, there HAS to be better storage facilities which I do believe the Mill owners will relish as they will obviously believe they will be the biggest beneficiaries of Govt. storage investment. After all it is they who will buy the shipments of paddy from this storage to run their mills with!!! However there has got to be safe storage for the additional paddy both for a reserve buffer stock, and to suck up the excess from the market, preventing a drop in the price of paddy and therefore rice. It is important that all these factors are taken into account for the farmer requests to be practical.

1 comment:

magerata said...

Happy new year to you!
As I have mentioned before, my family has rice fields in Japan (Kyushu). As the area is famous for high quality rice and the rice we grow is of premium varieties, wholesale price was around $3.11 last year (just below Niigata prices). Production is about 5-6 Mtons a hectare. This year the price will be even higher as a famous sake maker has booked all the rice from us (We will have to meet all their stringent requirements as a part of the deal but the price is not fixed).
It is very had to understand agricultural economics of SL, be it rice or tea. Thank you for the explanatory article.