USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed
25 April 2012
USDA GAIN: Sri Lanka Grain and Feed Annual 2012
Sri Lankan 2011/12 paddy production is estimated at 4.869 million tons, a record high. Record rice
production is leading to increased consumption and ballooning stocks. Despite surplus production, Sri
Lankan exports are limited due to a lack of grades and standards and low demand for indigenous Sri
Lankan rice varieties. Sri Lanka donated 7,500 tons of rice to the World Food Program in 2011,
signaling a shift from a rice deficit country to a rice surplus country. Sri Lanka does not produce wheat,
and wheat imports have stagnated over the last decade as Sri Lankan agricultural policy has shifted
towards promoting self-sufficiency in rice production.Commodities
Rice, Milled
Production:
Normal Weather Conditions and Record Plantings Result in Record Production
Following normal weather conditions and record rice plantings, Sri Lanka’s 2011/12 rice crop is at a
record high. 2011/12 area harvested is estimated at 1.262 million hectares (2 harvests combined on an
October/September year). 2011/12 paddy production is estimated at 4.869 million tons, a leap of 32
percent over the 2010/11 year. Sri Lanka’s production jump can be attributed to two factors. First,
following the end of armed conflict in 2009, Sri Lanka was able to greatly increase the amount of
available paddy production land (estimated at 30 percent). Additionally, the 2010/11 Maha crop faced
significant losses due to flooding and poor sunlight conditions during key growing periods. Given
excellent growing conditions in the 2011/12 season, Sri Lanka has become a surplus rice producer.
2012/13 Production Expected to Remain High
Post forecasts 2012/13 Sri Lankan rice production to remain at surplus levels given Sri Lankan
agricultural policies which limit farmer production choices and promote rice production. The
Government of Sri Lanka (GoSL) currently requires that paddy land be used uniquely for rice
production. This policy remains largely inflexible during the Maha period, although some alternative
planting choices are possible during the Yala season as water availability is lower and rice is not a
viable option. Given current surplus production and the resulting lower rice prices, more farmers may
opt for alternate crops during the 2012 Yala season. However, industry and government sources in Sri
Lanka have stated that under current production policies, rice production will remain elevated (assuming
normal weather conditions). 2012/13 paddy production is currently forecast at 4.6 based on slightly
lower area harvested, assuming average plantings.
2010/11 area harvested and paddy production are revised to 1.117 million hectares and 3.662 million
tons, based on final GoSL estimates.
Sri Lankan rice production incorporates a comprehensive irrigation system which sources heavily from
rain-fed tanks and reservoirs. Typically, Maha plantings benefit from annual monsoon rains, enabling
larger plantings. The Yala season, conversely, tends to have lower water availability, resulting in lower
plantings and lower overall production. The Maha season is typically harvested in March/April and
provides about 60 to 65 percent of Sri Lanka’s annual rice production. The Yala season is typically
harvested in September/October provides 35 to 40 percent of Sri Lanka’s annual rice production.
Consumption:
As Sri Lankan political stability has greatly improved over the last few years and local rice production
continues to increase, the country continues to consume more staple crops. As a result, 2011/12 rice
consumption grew to 2.8 million metric tons, 280 thousand tons over the previous year. 2011/12
consumption also reflects slightly higher residual consumption (waste/spoilage) carried over from the
previous year’s crop. Increased storage losses are directly attributable to lower quality grain which was
produced under flooding and poor sunlight conditions during the 2011 Maha crop. 2012/13
consumption is estimated slightly lower at 2.7 million tons, assuming fewer storage losses. However,
given Sri Lanka’s booming production and bulging stocks, higher losses may occur if local storage
capacities are greatly exceeded.
Rice is the preferred staple food in Sri Lanka and production includes significant varietal differences
based on local preferences. Generally, about 60 percent of consumption is made up of long grain white
rice, 30 percent short grain white rice, and the remaining 10 percent parboiled “red” rice and other local
varieties. A small portion of Sri Lanka’s rice consumption consists of imported basmati rice varieties.
Assuming a population of 21 million people, Sri Lankan per capita annual rice consumption is
approximately 130 kg.
Trade:
Sri Lanka discourages rice imports by maintaining a base import duty of 20 rupees per kg
(approximately 30 percent of the maximum retail price of local rice). A 5 percent Port and Airport Levy
(PAL) and a 2 percent Nation Building Tax (NBT) are also charged. These policies, along with
fertilizer subsidies, water subsidies, a minimum support price and limited planting options have grown
Sri Lanka rice production to the point of self-sufficiency over the past three years. As a result, imports
are limited to small quantities of specialty products, such as basmati rice from India and Pakistan.
2011/12 marketing year imports are therefore estimated at 20 thousand metric tons, while 2010/11
marketing year imports are finalized at 20 thousand metric tons, based on trade data. 2012/13
marketing year imports are also projected at 20 thousand metric tons.
Sri Lanka Becomes a Food Aid Donor
As recently as 2008, Sri Lanka received food aid shipments of rice. In an interesting turn of events, Sri
Lanka donated 7,500 metric tons of rice to the horn of Africa region through the World Food Program
in calendar year 2011. Although the total donation amount is small, it indicates the magnitude to which
the rice production scenario in Sri Lanka has shifted. Despite being a surplus rice producer, the export
market for Sri Lankan rice remains small due to challenges such as a lack of grades and standards and
low demand for indigenous Sri Lankan rice varieties. Sri Lankan rice exports therefore serve specialty
consumers, in particular Sri Lankan citizens living abroad. (Note that trade data indicates that the
majority of Sri Lankan exports are sent to the United Arab Emirates and Canada, two countries with
large Sri Lankan expatriate populations). Given these factors, 2011/12 marketing year exports are set at
10 thousand metric tons. 2010/11 exports are set at 17 thousand tons (based on trade and World Food
Program data) and 2012/13 marketing year exports are also projected at 10 thousand metric tons.
Additional food aid donations for marketing year 2011/12 are currently not foreseen.
Stocks:
Stocks Bulge to Record Levels
While Sri Lankan rice production has grown significantly, local consumption has not increased with the
same magnitude. Combining record production and minimal export options, Sri Lankan rice stocks are
growing to levels unseen before. 2011/12 marketing year stocks are therefore estimated at a record 685
thousand tons. With no significant changes foreseen in Sri Lanka’s rice production policies, 2012/13
stocks are projected to grow to 1.122 million tons, also a record. Note that record stock levels are
straining Sri Lankan storage facilities. If adequate storage for grain stocks in unavailable is 2012/13, it
is possible that the final number may decline due to spoilage. 2010/11 stocks are set at 164 thousand
tons.
Policy
The Government of Sri Lanka has a policy intended to create self-sufficiency in rice production and to
encourage rice consumption. The GoSL guarantees a minimum price to farmers through the Paddy
Marketing Board and also maintains a maximum retail price for consumers. In addition to these
measures, the GoSL has implemented a tariff on rice imports of RP 20 per kg and has also increased the
tariff on competing goods (ie wheat) to discourage competition with local production. The GoSL
further subsidizes up to 95 percent of the cost of fertilizer and provides free irrigation water through Sri
Lanka’s vast reservoir system. Finally, through the Agricultural Lands Act (No. 42 of 1973), the GoSL
obligates farmers to grow rice on paddy lands. Alternate crops are permitted only between paddy
cultivation seasons or if authorized by the Agricultural Authorization Committee.
Government officials report that rice yields in Sri Lanka average less than 4 tons per hectare. Current
policy is addressing the need for improved yields through research and development, specifically in the
areas of seed development and availability, improved management, and irrigation practices. Additional
outreach is focused on improving agronomic practices intended to lower input usage and decrease post
harvest losses, as well as the challenges related to soil fertility and salinity.
Commodities:
Wheat
Production:
Sri Lanka does not produce wheat. There are two wheat milling companies operating in Sri Lanka which import the entirety of Sri Lanka’s wheat needs. The larger of the two milling companies has a milling capacity of 3,600 tons per day and accounts for a significant majority of Sri Lanka’s milling activity.
Consumption:
Wheat imports were subsidized prior to 2004. As Sri Lanka has set rice production self-sufficiency as a
policy goal, the wheat import subsidy was removed and a duty on wheat has been added (15 percent or
RP 16 per kilo, whichever is higher). A 5 percent PAL and 2 percent NBT are also charged. This has lead to total consumption leveling off at around 750,000 to 850,000 tons annually. Wheat is not used as
a feed grain in Sri Lanka.
Domestic consumption of wheat products takes various forms, including pan style white breads, whole
grain Indian flat breads (roti), and various Asian noodle products. There is additional demand for wheat
products (buns) in quick service restaurant.
Trade:
2011/12 marketing year imports are set at 1.355 million tons and 2010/11 data is finalized at 945
thousand tons, based on trade data. 2012/13 imports are estimated at 900 thousand tons. While demand
for wheat for local consumption has softened due to the abundance of local rice and high tariffs on
wheat, a fair quantity of wheat is milled and exported throughout Southeast Asia. This is possible as Sri
Lankan wheat millers benefit from duty free imports on re-exported wheat products. As a result,
exports have grown over the last decade, while imports have remained stagnant. 2011/12 marketing
year exports are thus set at 310 thousand tons and 2010/11 exports are set at 279 thousand tons, based
on trade data. 2012/13 marketing year exports are estimated at 350 thousand metric tons.
Sri Lanka benefits from a Free Trade Agreement with India. While Indian agricultural goods do not
benefit from a preferential tariff arrangement in Sri Lanka, some Sri Lankan agricultural goods benefit
from tariff reductions on exports to India. In order to qualify for this benefit, at least 30 percent of the
product (by value) must originate in Sri Lanka. In the case of wheat flour, Sri Lanka adds less than 30
percent value to imported wheat, and as a result, Sri Lankan exporters claim that wheat and wheat flour
exports to India are not significant at this time.
The U.S. primarily exports soft white wheat to Sri Lanka.
Stocks:
The government does not maintain reserve wheat stocks. Post estimates industry held-stocks at approximately 456 thousand metric tons in 2011/12 and 261 thousand metric tons in 2010/11.
April 2012DOWNLOAD REPORT:- Download this report here