Bounties create bankruptcy

Friday, 22 February 2019 00:00 - - {{hitsCtrl.values.hits}}

Pumpkin farmers have had a bumper harvest, but instead of celebrating the bounty, farmers are struggling to sell their crop and face bankruptcy. The situation has become so dire that Agriculture Minister P. Harrison appealed to women to consume more pumpkin on the presumption that it increases their beauty. But why is oversupply such a problem in Sri Lanka and why aren’t policies adjusted to deal with it?

Obviously oversupply drives down prices and while food is essential for people, it does not mean that they consume more basic food as incomes grow. If one consumes a kilo of pumpkin a month when they earn Rs. 10,000 a month that does not become 10 kilos when they earn Rs. 100,000 a month. Therefore, agriculture is known as a product with low price-elasticity. This means that oversupply is a death knell for farmers because prices drop sharply, leaving them unable to earn enough to repay their loans. So a bountiful harvest isn’t necessarily a good thing. Even when farmers have worked hard to get a large harvest, they are still left facing debt and deprivation.

Agriculture is a difficult industry to manage, which is why even developed countries such as Germany, United Kingdom and the United States heavily subside their farmers. Sri Lankan farmers get a fertiliser subsidy but little else, especially in the way of creating market access. In Sri Lanka the situation is made worse by little or no technology infusion or oversight. Farmers are often left to guess what crops will get a decent price in the market and there is little research done to give data-driven information to farmers.

In this lacunae farmers are often stuck guessing what to plant and how much they may be able to earn from the crop. Since there is a time lapse between the time crops are planted to harvest time, market conditions can change drastically. The local agriculture industry also has very little flexibility in being able to add value to their products, either for exports or to create up market products that would earn more money.

Rice fares well in this situation because it is a staple and the Government has over the decades established a system that allows farmers to sell at fixed prices and the paddy is warehoused and released systematically to the market over many months to protect prices. This industry is not perfect but it is functional. For other crops there is little or no planning, value chain links, marketing or value additions. To add to the complexity agriculture in Sri Lanka is the least productive sector but has the largest share of labour. This means that when the sector suffers it affects a larger segment of the population.

Clearly the Government, experts, private sector and other stakeholders have to do a complete rethink of product management, how to infuse data driven planning and market projections into agriculture. It is also imperative that they establish alternative demand systems before the harvest rather than having knee jerk reactions like force feeding pumpkin to the population.

It is not just pumpkin but coconut and other crops have also seen a drop in prices because the weather has improved. This is the first time in about three seasons that harvests have been good, but instead of celebrations there is only a cacophony of cries.