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Tuesday June 22nd, 2021

Sri Lanka aflatoxin fears rise as money printing trigger maize speculation

The Aflatoxin generating Aspergillus flavusfungus is believed to pass onto the corn cob from the soil.

ECONOMYNEXT – Sri Lanka’s maize prices have soared and fears of aflatoxin in poultry feed are growing as businesses newly displaced by import controls got into corn speculation without safe storage and prior experience, an industry official said.

Prices of maize, a the key ingredient of chicken feed have soared to around 88 to 90 rupees a kilogram as a part of the Maha harvest was bought up by businesses displaced by import controls with maize itself banned to promote ‘import substitution’.

Sri Lanka is facing foreign exchange shortages amid unprecedented money printing by the central bank under so -called ‘Modern Monetary Theory’, triggering 1970s styles state interventionism and import substitution.

“In the last season maize went up to 110 rupees a kilogram,” Ajith Gunasekera, President of the All Island Poultry Association said.

“So people like car importers have bought maize. But they do not have proper storage, so they have put whole maize cobs in gunny bags and are keeping them. They have no moisture control.”

The maize speculation is a classic fallout of money printing or one of several results of what classical economists call ‘inflation’.

The inflation of money supply results in mal-investments, commodity bubbles as well as asset price inflation.

Some of the effects of ‘inflation’ are not captured by state compiled inflation indices which are designed to understate price spikes, especially in foods and energy commodities.

Sri Lanka’s stocks have also soared with businessmen displaced by the import ban getting into stocks. Some stock punters also expressed disappointment in online forums for not buying turmeric and green gram whose prices have soared after import bans.

Turmeric would have returned higher than stocks they pointed out.

To safely store, maize has to be dried and the moisture content kept below 14 percent.

Sri Lanka’s so-called ‘maize Mafia’ that collect the grain and drive up prices in collusion with the elected ruling class and bureaucrats have built silos and also use dryers to control the growth of fungus and the build-up of aflatoxin to a great extent, industry analysts say.

“Poultry famers do want use maize with high levels of aflatoxin,” Gunesekera said.

Gunasekera said in 2020 there had been rain in March which disrupted the drying of maize corns.

Some in the maize supply chain dry corns on the roadside using the dry weather in March.

The rains had worsened the problem in 2021.

Industry analysts have said in the past that Sri Lanka maize farming is not export competitive partly due to import tax protection which had discouraged productivity improvements like paddy and potatoes, but also higher than permitted aflatoxin levels.

The Aflatoxin generating fungus is believed to pass onto the corn from the soil. Aspergillus flavus species is mostly linked to corn.

Past research has found up to 60-70 part per billion of Aflatoxin B1, in tested samples of corn kernels above the 20 ppb or so permitted level set by international food regulatory agencies such as the US FDA, especially in the Anuradhapura district, where prevalence in the soil seem to be greater.

Sri Lanka’s poultry sector is a textbook case of state interventions, policy shocks that hit small businesses for students of economics to study and learn, analysts say.

Sri Lanka poultry farmers have been squeezed in multiple ways by state interventions with a politically backed ‘maize mafia’ driving up corn prices with the use of import duties and permits, while a price control agency slams ceiling on the chicken meat driving small farmers out of business at times.

Sri Lanka’s chicken prices have surged to around 700 rupees in April 2021, while corn prices and day old chick prices have also gone up.

In April the government has issued permits to import husked corn to poultry sector to make feed, amid the maize import ban.

Maize is cheaper than corn to import. (Colombo/Apr21/2021)

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