Sri Lanka projects 0.5mn tonne rice surplus in 2019

ECONOMYNEXT – Sri Lanka is projecting a 535,000 metric tonne rice surplus for 2019, after two seasons of good harvests, though the island’s paddy cultivators do not produce standard export grades of the grain unlike tea, rubber, coconut and spice farmers.

Sri Lanka’s Department of Agriculture said 3.07 million metric tonnes of paddy was produced in the main Maha season, which can be milled into 1.94 million metric tonnes of rice.

In the Yala minor cultivation season, the paddy crop is estimated at 1.54 million metric tonnes, which could be milled into 0.94 million metric tonnes of rice.

The annual rice availability is estimated at 2.88 million metric tonnes, when a total of 4.61 million metric tonnes of paddy is milled.

The agricultural department is forecasting a rice surplus of 535,870 million tonnes for 2019.

Sri Lanka’s large private milling companies have rice storage. It is not clear how much they have.

In 2015 a bumper harvest was also estimated to have produced a surplus and state rice purchasing agencies ran out of storage.

There is heavy state intervention in the paddy cultivation and price support, unlike other globally competitive farming sectors.

Unlike Sri Lanka’s tea, rubber, coconut and spice farmers who earn foreign exchange in export markets there is no export market for rice, partly because the island does not produce international traded grades of rice, prices have ket high and there is no trade historical trade links.

Several businesses export small volumes of rice into markets where expatriate Sri Lankans live.

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Sri Lanka’s rupee has fallen in recent year’s and domestic prices have stayed the same, bringing prices more in line with global prices.

In a related development, Sri Lanka’s price control agency has blocked a wheat miller from raising flour prices after the rupee fell, which would have been a market response to increase balance demand.

In the past, Sri Lanka has kept wheat prices up artificially with import taxes increase profits of rice farmers, at the expense food consumers, in another misguided state intervention in the opposite direction instead of dealing with the key problem of producing a non-traded good. (Colombo/Sept18/2019)