The vast areas of arable land that is not cultivated in Sri Lanka

I would like to point out that in my travels in the Gampaha district lately, I see huge swathes of land that remain uncultivated. They are mainly the paddy lands which we see all around us. This is simply a shame. The government as usual tries to make rules for people to follow, not make the foundation for a solution. So what they do is say they will take over uncultivated lands, unless the owner cultivates it. By making such rash and unsound statements, they are laying themselves open to ridicule.

It is simply not practical to farm these lands in small units. In order to achieve a profit the whole field, some with over 50 owners must be cultivated as one, and the renter can pay the owners of the land, an amount based on that person’s allotment size. The problem is one person’s opinion of what is a reasonable rent may differ from anothers, so there may be some form of set rate, and as all the owners have to participate, as otherwise the tenant farmer will not take up the opportunity, it is not an easy one to solve, but is doable.

It is this out of the box approach that is now needed for cultivation, as we are only realizing a minuscule amount of productivity from our lands due to the small intensive agriculture we have practiced for generations, which does not make economic sense today.

On the legal side, what they need to do is to reinforce the ownership of the land, so the owner does not lose his rights if someone else rents that land for any purpose, even to graze their cattle. If one just takes the latter as an example, if I am able to rent a large paddy field for a period of three years to grow grass, and then use this new variety of grass that is high in nutrients for the cows, I may be able to run a profitable dairy business.

If I can do this in the Gamapa district close to the areas of consumption of milk, it will serve many purposes. It will help us become self sufficient in Milk production for domestic use. It will also help us utilize unutilized land for a constructive purpose without using it as fallow. A mix use of growing grass can turn the soil fertility round and be a good intermediate crop before the owners retake the land once the leases expire and grow their agribusiness after taking learning from the current tenant of the self same land.

Most agricultural advisers see this anomaly, and have suggested that they get involved in the projects currently in existence. It is very important that we understand, that the land lies fallow because the owner is otherwise engaged in a career however the interpretation of the law precludes him from renting out the land either, due to the fear that it could be taken over.

In conclusion, we must enact legislation without delay to preserve the ownership rights of property and permit renting out of land for a fair rate that provides the high risk farmer a certain level of knowledge that he can farm the land for the term of the lease without any encumbrances other than simply making the annual payment in advance. In this system all stakeholders will be empowered to make a difference by using their land wisely to maximize the productivity and benefit the nation.  

I believe too few people understand the potential of this land, because we are still stuck in the 18^th century as far as agricultural practices are concerned and must take a few leaps of centuries to get to the current date and implement practices adopted now. What is worse a lot of emphasis is on going back to past to copy from what was done then.

Once must learn from the past so the same mistakes are not made by a new generation and adopt the relevant practices for the present.

The whole of the Gampaha district is becoming a place littered with single family dwellings on one level, some with large plots others with just enough room for a home, and many in between. Of course the in between ones appear to use the land area for growing food to feed the family, whilst the larger plots are generally under utilized as it requires a large labor input if it were to be cultivated intensely. They nevertheless have an assortment of trees that produce different fruit depending on the seasons for personal consumption, surrounded by the fields I referred to which are not economical for the owners to attempt to cultivate and which they dare not give to another farmer to work on for fear of not being able to recover the land.

So I believe the law must be clear, and one should not have to go to court to retrieve the land once the lease expires and must automatically revert to the owner unless there is a new lease agreement from scratch as a new rental that is agreeable to both parties.

The guaranteed price – Is it a win win situation for both parties?

In my blog entry yesterday I reported on how once farmers were given a guaranteed price for their produce, in this case corn of Rs35/kg they were able to produce a bumper crop, which for the first time made Sri Lanka a net exporter of corn. If this is a real life example then we must adopt it for other crops, especially if we can guarantee export at a quality and price the importer in the foreign country wants.

It is worth remembering that if the price in the local marketplace was higher than Rs35/kg, I wonder if our farmers would stick to the agreement or try and sell their produce elsewhere! Either way, it is a start and has proven to work and the farmer who grew this crop definitely wins hands down over the farmers who planted paddy.

It is also worth remembering that the fertilizer subsidy extends to all crops now and so the urea used by the corn farmers now costs Rs1000 a 50kg bag as opposed to the Rs4000 which is the world market price at which the government buys it to sell to these farmers. I would dearly like to know what the average use of urea was per 1000kg of corn. If it was two bags then this extra cost of Rs6000 must be added to costs to determine if the nation as a whole benefits as the 35,000 per effectively incurs an export levy of Rs6000 a tone. As today’s spot price in NY is Rs 33,000 for corn, then one wonders how beneficial it really is! We are effectively giving the exporter a subsidy of that amount. The flip side of this is would the farmer have grown this product if he had to pay full price for the Urea, an essential component input in the growth of corn as a little is put into each planting hole at planting to maximize weight and plant growth?

So, on the same vein if paddy farmers are guaranteed Rs35/kg for a quality paddy that will be used for export, then we again must take into consideration the fertilizer subsidy when counting the cost of export. In this case the per ton subsidy is greater as the fertilizer subsidy for rice is much greater as the same bag is sold for Rs350 to the paddy farmer and not Rs1000 as sold to the corn farmer.

When the Rs50B subsidy for fertilizer per annum is accounted for I wonder whether our calculations of the success are true!! It is something for the policy planners to think about when making rash statements of the success of this type of export. What if this subsidy is removed? Will the net benefit to the economy be plus? Only good paddy land will be cultivated and the surplus will not arise, and possibly give rise to shortages and price rises. Another interesting possibility for consideration. I really wonder if this sort of analysis is undertaken by the planners in making important decisions that affect the lives of ordinary people.

Exporting Corn to Taiwan and Canada! The sweet smell of success

I must confess that I am pleasantly and unbelievably surprised that after many years of Sri Lanka being a net importer or corn, we are now a net exporter of this product for the first time. If the government statistics are to be believed, our annual consumption of corn is 180,000 tonnes and this year due to a harvest of 200,000 tonnes we have a surplus of 20,000 tonnes for export. That is an extremely creditable achievement which we hope can be built upon, firt for corn and then for other products. I Understand that Wyamba Traders have entered into forward purchasing agreements with up to 2200 farmers in Anuradhapura District at Rs35 a kg for the maize/corn  which takes 75 days from planting seeds to harvest and this has helped the farmers earn a reasonable return as compared with paddy cultivation.

I have grown corn myself and know if it is grown in large quantities one can use many labor saving tools to harvest and separate the corn from the cob, which is obviously the reason for this success. Most of the corn we produce goes for animal feed, and in the past we imported this to make the animal feed. There is no doubt that we have used high yielding varieties of seeds bought at high cost, from international suppliers who amy also have used GM seeds, though our seed control people are blissfully unaware that we are unable to market GM produce in the Island!!

Nevertheless credit must be given to the farmers for producing corn in abundance so that we have sufficient for export too. I hope we do not see a day when we import this commodity if we have ideal soil and growing conditions to grow it at a cost that is lower enough where we can compete in the world market with other suppliers. I am at a loss to know why we are sending corn to Canada, surely a very high producer of the item! I guess there is a reason for that.

On a related issue I am currently not in the loop on the price of corn in the market. All I know is that egg producers are losing money hand over fist with the drop in egg prices to Rs6 wholesale which would be the price the producers receive no matter what we pay at the store! If the feed cost including corn is so high, I do not know how they can sustain purchasing this product, and if they cull their flocks due to the losses, then the demand for corn would drop further.

This success in our agricultural products could be a fore runner of more marginal land going from paddy cultivation to growing corn as the latter does not require that much water and in the Yala season a perfect intercrop to complement paddy, and once harvested the spent trees can be ploughed back into the soil to improve the humus content of the soil as well the natural nitrogen content. I have fed the newly harvested plants to my cows as animal feed also so I am sure with some ingenuity many uses can be found to enrich the soil of paddy fields with this crop.

Divi Vinashaya – why there has been no plan

I was asked why I was so harsh on the Divi Neguma program. It is simple. It was designed by fools who can’t think beyond their noses. They have fooled everyone for what? Let us just take an example of the two aspects of farming. One by those engaged in it for a living, the GOVIYA! And the other the kitchen garden. The latter is only encouraged to grow, for improving the diet at home, by eating healthy fruit and vegetables and having a surplus to exchange with neighbors, take to relatives, or sell in the local pola or to local kades, to supplement income.

One example of how we must get rid of the surplus.

Since the end of the war the North has opened up to agriculture. Farmers there appear to be more efficient in their production techniques and are giving a run to the Nuwera Eliya farmers as they are competing to produce up country vegetables. Then they are giving a run for the red onion farmers in the East, as they can also produce this, thus reducing the price from the Rs200s per kg to single figures. The produce from the North coming to the Dambulla Economic Zone, has reduced the vegetable prices significantly putting a lot of farmers in the South who were less efficient out of business permanently. They cannot compete with more productive, and efficient producers.

Sri Lanka must make an arrangement with the Maldives to fly produce from Jaffna airport to the South Atoll and then to resorts closer to them. The exporters in Colombo currently find a big problem in supplying the orders for their Maldives customers, so it would be a method of directly supplying fresh produce from the North to them, and reduce some of the bottlenecks in bringing it to Dambulla. 

The Government should engage in this if it is to find solutions to these problems. They are simply unable to think outside the box and so get into a situation, where they have encouraged people to produce with no means of marketing the produce. In the end the relationship must be a direct one with the farmer and the exporter, who will produce to order, knowing that prices and quantities are guaranteed. The farmer at the same time MUST understand that in order to get a guaranteed price, when there are shortages, and the prices in the market exceed the guaranteed price, he must fulfill his commitment to the exporter, who has stood by him, rather than sneaking out the produce to the local market for higher prices.

The surpluses created could just as soon DRY UP and become shortages. The Govt. will be to blame. They have not been able to find suitable markets, and in the meantime the farmer has gone belly up leaving it to the survivors to prosper.

There is very little information on the plight of the farmer in the Press, as it is a topic that very few reporters understand. We are creating a very hard working underclass that are misled by this government as regards to their entitlements, without adequate explanation as to what we wish from them and the promises made to them. We have therefore let the farmer down, by lying to him and taking advantage of him.

Only time will be a luxury to show the error of the present direction and the need for an equitable solution

Divi Neguma has turned into Divi Basuma – do not screw the farmers more!

I have maintained that there is no one in the policy making bodies who understands farming and its practices and practicalities. Bureaucrats and Ministers who own land, farmed by others think they know what the real problems are. This is not like running a plantation, this is a hand to mouth existence and lying to them merely makes the liar a hypocrite also. This is a serious problem not to be taken lightly.

So it was with interest that I read about Basil Rakapakse meeting with Agribusiness Leaders (minor industrialists) about how they should use the raw materials from the success of the Divi Neguma program that has provided huge surpluses of food and turn that into export products or other forms such as preservation, canning and such like. It goes to show his lack of knowledge of how the inputs into Agribusinesses are collected.

To those not in the loop, the Divi Neguma program attempts, though not at all successfully as I have pointed out in earlier entries here, to help each household, produce healthy food, in the way of a home based activity, both for consumption, and the surplus to sell, and to provide unneeded expenses, such as Dimo Battas to take this business a stage further by using that means to market their products or other similar products from their fellow brethren in the village.

I am not repeating the scandal of the Dimo Batta here, with these poor folk being forced to pay Rs30K a month just as the lease payment for 56 months, but to show that impractical ideas are put into people who first need a basic understanding of how to engage in an economic activity.

The Agribusiness leaders know, that in order to run their operation, they need a supply of raw material close to their factories and at a reasonable cost. Small economic units are very inefficient in this. That is why there is no practical solution for the desperate need of pol-katu,(coconut shell) to be taken from each household say once a month to the company that needs the raw material in bulk to make charcoal. Forget Divi Neguma, it is the Farmer who you should engage in.

The same principal applies here. Then we have the farmer who really needs to engage in a relationship with the processor in order to find a market for his produce. At present he is losing heavily by not covering his cost in income he receives from the wholesalers for his produce, due to the oversupply by the Divi Neguma lot, which has decimated the prices of most everything the farmer currently plants except for “TOBACCO”. SO PLEASE first decide on policy that is HOLISTIC! and not ad hoc.

Tackling agricultural surpluses – a new dynamic!

I was taken to task by a one advocating export of surpluses by my criticism in yesterday’s blog entry about the efforts of the agricultural department to export varieties of rice. I know I was rather harsh on the Secretary to the Ministry, who in the past would have initiated a common sense approach, but in the current heavily politicized climate, is just doing the bidding of his Minister, even though he may vehemently disagree with him.

That took me back to 1950 when CP de Silva who was in the Ceylon Civil Service, and was working in the Land Development Department (historians please correct me on some of these facts) had a disagreement with his Minister Mr Dudley Senanayake who was the Minister of Agriculture under the DS Senanayake administration and promptly resigned from the Civil Service, when he could have just requested and got a transfer to another department under a different Minister.

Just for the record DS tried to persuade him to withdraw his resignation, but he refused, and left on the second anniversary of independence. He bought a 50 acre plot of land in Tabbowa in the Puttalam District where he had served many years ago and began a simple life of a farmer, when in 1952, SWRD himself personally turned up into his shed like cabin, and persuaded CP to join him in Politics. CP went on to win the Polonnaruwa seat in the 1952 election which UNP won with Dudley. It is also worth noting that Dudley asked CP to be the Prime Minister when he won the 1965 election, so even disagreements do not make enemies!!!

I am sorry I digressed completely from my point, which is to illustrate that I am not anti export of agriculture. In fact I am a proponent of export of our produce. It is the cynical way those who do not understand the topic go about it that angers me.

There is a huge export market for our produce, fruit, vegetables, and rice. I know vegetable and fruit exporters, whose daily grouse is that they do not have SUFFICIENT QUANTITY of standard quality products to meet the demand. We do not have enough large scale producers who will use the latest techniques to get productivity and consistency to supply the export market. The Govt, is giving incentives to foreigners, by leasing them large tracts of land for projects (they sold Polonnaruwa farm of 2000 acres a few months ago to an Israeli company, to bring in cows to produce milk.)

A person in SL with 50 acres is considered big. The average peasant cultivator only works about 1 hectare(2.5 acres) as a maximum. Given this reality, we cannot cater to all comers and try to save the smallest farmer from going under as well.

In my previous entry, I recommended a guaranteed minimum price for export quality crops, of the varieties required for export, of Rs50/kg as a way to go. The reality is that the efficient farmers anywhere in the country, will work productively to produce that quality, and make a lot of money, however the small farmer who we are targeting to help will only marginally benefit. That is the nub of the prob!

This comes back to the point of productivity and economies of scale in agricultural production. The govt. must have a policy on how each segment is treated, incentivized and compensated. Agriculture being a high risk venture requires high reward to encourage private sector investment. Land is the scarce resource for the large scale investor who does not want to tie up large amounts on buying up land. So leasing large tracts to the private sector is a way to go to solve some of the pressing problems, but with it one has the costs attached to it, of local people working for a wage, who have had to give up farming due to their inefficiencies. Intensive mechanization, so that few benefits accrue to local villages, with most of the profits going to the providers of capital who live elsewhere and overseas can result. No wonder the JVP views on equality hold so much sway in the rural areas, but which never gain traction, as they do not have a viable method of getting them out of poverty due to the lack of critical mass in the market to make a difference.

The transfer of the pricing determinant from the Miller, the wholesaler and intermediary to the grower, is what economists the whole world over are even now grappling with without answers, leaving agriculture to Market supply and demand dynamic that is only in the farmers’ favor when shortages are in the horizon. The farmer must be equipped with the tools to understand this complicated risk and to mitigate it in his favor. The answer we can give each farmer heavily depends on his or her personal circumstances, there being no cookie cutter formula that applies to all, to resolve individual differences in this sector.

Anyone who comes with a satisfactory solution will be the farmers’ savior. So let’s begin by challenging the price fixer to increase commodity prices. The productive producer has an incentive to grow. The smaller producer is encouraged to get to that level of productivity or perish. There is no point designing a system to help the marginal producer, which only helps the big boys, as the butter, milk and beef mountains of Europe have shown as clear examples of policies gone wrong.

I was only yesterday asked to start by accumulating a cash reserve, purchasing quality paddy at a higher price, and converting to rice and selling, forcing the Millers to raise the price they offer, thereby being able to take credit for the act!!!

I have to restrict my purchases to only buying from a pre-agreed list of people who are those that are dependent only on paddy farming, and farm less than a hectare each. I offer a price higher than that the Govt. say Rs30 but conditions have to be met. Cash on the table when the product is supplied. The model is similar to that which Food City currently use with its farmers and the product they purchase from them. However if they offer more than the State for the paddy, will the big Millers really raise the price they offer as they are the oligopolist price fixer?

The answer is NO. They know there are enough farmers who can supply, and even if I offer a high price, I can only buy so much, my economies of scale are much less, and my distribution costs also are higher, resulting in much smaller margins to my enterprise that will not sustain me for long enough to be a threat in the long term. Even the Govt. dare not take on this role of competing with the Miller on price as even they know from past experience they end up holding stock of paddy that just rots. The intricacies of Govt. inefficiencies and greasing of palms that compromise the quality of the paddy that is bought and all the good intentions of helping the farmer and the consumer both at the same time is just a costly exercise of losses to the state enterprise that engages in this.

The alternative I fear is that we will see many small farmers going out of cultivation, and the threats of the Govt. forcing them to cultivate will create tensions that boil over into a full scale agitation. This is a distinct possibility if sufficient people are badly affected.

Do we then go for the other option of increasing the price level of the commodity, by removing the surplus from the market place? We would otherwise not be able to keep the price high if there is leakage at lower prices. The big Miller’s profits will rise still further giving him unassailable clout to market manipulate even further, by forcing a temporary rise in prices, to suck up the supply and then dump the farmers by lowering the asking price later, when there is no one else to help them.

As one can see a proper management of the surplus to achieve macroeconomic goals of price stability and the survival of small farmers is a very tricky one. They are two issues and cannot be combined. Export markets are the only solution to surpluses so they do not either waste produce or have an overhang which will lead to price instability, that may wipe out an entire sector. The protection of the small farmer is an entirely different issue as his survival depends on productivity and efficient and productive units. For that the marginal farmer will have to disappear, replaced by a professional farmer from the ranks of the educated youth, who will be able to manage an economically feasible lot profitably in the long term.

The latest insult to Lanka’s paddy farmers – export of rice

It was reported a short while ago today, April 18^th 2012, that the Secretary to the Ministry of Agriculture, KA Sakalasooriya, has announced the creation of four zones for export. One in each of Mannar for growth of Keeri Samba, Hambantota for growing red rice, (presumably long grain) and Polonnaruwa and Anuradhapura for growing BG 357 a variety of white rice. It was further announced that in the next Yala season this paddy would be purchased at Rs40/kg.

Why is this announcement insulting? He has no clue about rice farming, about yields on different soil and growing conditions, and on different varieties of paddy.

I have planted 6 varieties of paddy, and I have personally sold door to door, 14 varieties of rice arising from this paddy. I have also grown keeri samba a particularly fine grained white rice. Its yield is usually a lot less than other varieties and I have sold the rice for around Rs100/kg which is about what the price is for the par boiled variety even now. I like to say they look like ‘podi muthu ata’

Rs 40/kg is not enough to compensate for the lower yields. At this price I can buy the paddy, and mill it and sell it at Rs80/kg and still make a profit of Rs10/kg, after taking account of transport. A large miller will make a profit of Rs20/kg as he has other cost savings that I do not have as I pay a small miller to do so. Further I wish to reiterate that I grew Red basmati as an outgrower for CIC and lost a lot of money. I was promised Rs 42/kg for paddy, for rice they sell at over Rs150/kg.So I do not trust these statements.

I really suspect that if farmers produce paddy at this price for the quality that is required for export, it is the Miller who will make the profit again, as he has the market sown up, and all the Government is doing by making this promise is doing the bidding of the Millers who have given the Govt. an undertaking to buy this paddy at this price, something they cannot do at the moment, due to the lack of sufficient quantity of paddy of these varieties to meet export orders.

I trust the reader can understand where I am getting at with this argument. The Miller has seen a greater opportunity using the auspices of the Govt. to try an ensure sufficient quantity of product to meet their market. So they can increase the profit they make. I ask him to pass on the commission he makes on this to the farmer by offering the paddy farmer at least Rs50/kg for the paddy of these varieties to ensure sufficient supply. There is NO way farmers will fall for the Govt. ruse in sufficient quantity for export to ensure viability in economies of scale. SAKALA go back to your drawing board please and TRY AGAIN

A Govt. that presents itself as the friend of the farmer has been the one that has ruined farmers forever by their lack of a comprehensive agricultural policy. Due to their expert media effort at fooling the Agricultural community, they have successfully hidden their deception from the public, and I am attempting by using actual real world examples to show that they have no idea of what they are doing. The farmer is being crucified by this government and the farmer seems to be going to his crucifixion like a lamb to slaughter, what a sad sad reality!!!