Nearly 40% of the population of Sri Lanka are involved in farming with the majority of these engaged in rice farming. The farming community in the country is primarily from the poorer segment of society. As an economically disadvantaged group, they lack effective organisation, leadership skills and representation at a political level. Lack of l strength and effective voice means the community is dependent on others, many of whom have different agendas and interests.

With an economy so dependent on the rice crop, to ignore the need for proper, fair and equitable support and policies for the farming community is to endanger the very stability of society and adding further political woes to an already economically challenged country. What is necessary is a bottom-up approach rather than the traditional incumbent of a top down system. This is true of the sector irrespective of the geographical location within the country. Leadership from within needs to be developed, coerced and encouraged.

Technology and Economic Factors

Technology brings major change to farming. Some good for the farmer, some not so good. Recent studies demonstrate that with rupee depreciation, rising fuel costs, increasing labour costs the charges levied has increased to such an extent that many farmers considering whether to remain in paddy cultivation. The high paddy prices in 2008, though, has provided some respite for the sector. It provides the government and decision-makers some breathing space in which to implement policies and enhance support for the sector. Whether they do so remains to be seen.

The needs of the rice-oriented farming community are not insurmountable and pose no major challenges to the government. They include;

• Quality managed water supply
• Seed paddy
• Fertilisers
• Farm implements, pest and insect control solutions, etc
• Access to finances with least bureaucratic hurdles and at reasonable cost
• Purchase price that reflects both costs and a reasonable return on the investment

Beyond these needs are a number of requirements in the sector that will serve to stabilize and enhance the security of the farming families. These requirements include;

• Debt relief
• Financial strength to hold paddy stocks with them to optimize price and revenue
• Living standard that meets his aspirations
• Higher degree of influence in his own affairs
• Independence and inter-dependence within the community

The needs and requirements in the sector identified here are based on the degree of influence these issues have on the life of the farmer. These collectively have the highest impact on the daily life and future of the farmer.

The other critical issue in the farming community is one of ‘ownership’ and participation in the value chain. The commerce of rice spans a range of activities from sowing to harvesting and milling, packaging, branding to distribution and marketing. The value addition in this chain happens at procurement to milling, stocking to distribution and marketing. The farmer’s benefits only at the bottom of the value chain with little opportunity to optimise. The major millers on the other hand, benefit enormously with ownership of the high end of the value chain and effectively making them the real beneficiaries in the sector.
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Other countries with similar legacy problems for the farming community, for example the butter producers in Ireland, have addressed this challenge by forming co-ops where the farming community take ownership of creating the value-add. In the case of Ireland and the butter industry it resulted in the creation of the world-famous Kerrygold brand under a farming co-op. The initiative there saw a sudden stop of export of bulk unblended butter to England where it has traditionally been sent. The economic benefit, not just to the Irish farmer, was very substantial even to this day. The challenge in Sri Lanka is whether such an approach can be developed and, if so, who will lead and drive the initiative?
 

Strengths
• Availability of land
• Farming knowledge
• Ability to work long hours
• Simplicity of life style

Weaknesses
• No access to low cost finances
• Lack of good storage facilities
• Lack of financial power to hold paddy for extended periods
• Limited influence in their own affairs
• Often in debt and under obligation to the private paddy buyer
• No say in end consumer price
• Proxy producer for middle man

Opportunities
• Innovate and organize to capture more of the value chain
• Build influence in the paddy chain
• Ensure right price for their paddy
• Profit from any variation in the price of rice
• Build financial strength
• Ensure steady income even after having sold the paddy stocks
• Uplift living standards
• Create a viable sustainable and profitable industry
• Attract those who are presently in marginal employ or under employed
• Build and sustain marketing and distribution process
• Establish a pension or provident fund scheme
• Dividends

Threats
• Mega rice industrialist
• Power of the existing mega-brands
• Administration conditioned to present system

Sri Lanka's Rice Sector - Development Goals

Achieve independence, acquire authority and influence in the production and processing of paddy and marketing, pricing, distribution and revenue optimization of rice by year 2012

Assumptions
• Adequate funds will be available at lowest rates from multilateral or other lending agencies
• Presence of political will
• Shares restricted to actual rice farmers only
• Private Sector style management

Overall Objective
Develop an industry co-op (better) or public company where the ownership is by the farmers. Such a structure will manage the affairs of purchasing, processing and marketing, bringing a ROI to all stakeholders. It will benefit the government too by enabling the sector to become self reliant and by increasing the attractiveness of rice farming. In a wider sphere it will contribute to national growth

Strategy Options for the Sector

• Acceptance on the fundamentals of becoming organized and creating a co-operative structure by the farming community. This will necessitate developing leadership and support for its implementation.
• Educating and creating awareness among the rice farmer why he/she should take charge of the rice chain
• Creation of the optimal legal structure to ensure key ownership and benefit of the rice trade remains with the farming community.
• Financial support based on non-commercial or subsidized terms from those multilateral agencies who claim their desire is to uplift the poor masses.
• Take and develop ownership of milling, storing, packaging facilities, and perhaps also ownership of the logistics.
• Develop branding, distribution and marketing, through own outlets as well as the other wholesale and retail community
• Development of effective payment mechanisms.
• Adoption of leading edge information and communications technology solutions to support effective overall management practices.
• Gradual and systematic upgrading of the quality, varieties and volume of rice produced with export markets in vision
• Development of supplementary crops and land use to optimise use of marginal lands not suitable for rice and product development and marketing. E.g. reed, reed mats, reed boxes etc.

The starting point will be creating and nominating a central organizing committee with representation from across the rice farming community in the country. The members of this committee, likely supported by NGO’s with the necessary skills, will be tasked with educating and creating awareness among the rice farmer why the initiative of co-operation and asserting ownership makes sense. This will include;
• Secure necessary funding to establish and organise
• Defining the optimal legal structures.
• Defining the requirements and benefits of ownership of the value chain.
• Develop audio visual programmes explaining the merits of this model, the benefits and what it will do for their living standards.
• Train resource personnel to educate, communicate and get buy-in from the farmers.
• Demarcate the main rice growing areas based on a set of principles.
• Define the current sector in a research-based study across the country.

• Present the business case to the multi-lateral donors
• Quantification of the current production volumes based on the growing regions for assessments of the desired critical mass for creation of the necessary structures.
• Agree upon the financing modalities

Use of Funds

Own milling, storing, packaging facilities, own or third party logistics
• State-of-the-art milling facilities sited based on density of growing, ease of access, transport facilities etc
• Proper own storing facilities such as silos for storage of paddy and rice
• Packaging facilities enabling creation of own brand/s
• Transport and other logistics support, both own and ability to secure third party services at competitive rates

Distribution and Marketing

• Branding of the rice products
• Develop other rice based products such as rice flour, breakfast cereals and other value added products
• Pricing modalities
• Develop/secure wholesale retail network
• Promote to optimize use of rice and rice based products

 

This will likely be a combination of guaranteed process for product supplied plus distribution of dividends as agreed intervals throughout the year. Within the structure, the New Organisation may decide to set aside funds annually to establish and create an effective pension fund for the Members. Over time, the financial strength of the Organisation should be such that it will be in a position to provide financing to the Members on preferential terms to that of the banks and current financial businesses in the sector.

Developing an ICT Strategy - a Short-term Solution

In order to minimize the upfront ICT infrastructure costs, the new Organisation may wish to consider making use of village resources for rice commerce data;
• Computer resource centers to create and maintain all commerce data
• Computer centers used for upkeep of all production data and build database of production, consumption, consumption habits to forecast future consumption patterns and use that data to plan growing of rice and new product development
• Maintain subsidiary-production and marketing data and income supplements

Innovation, Research and Development

The new organisation will adopt a gradual and systematic process of implementing research and new knowledge to upgrade the rice crop in respect to quality, varieties and volumes. This will include;
• Optimisation of production from existing acreage
• New land cultivation
• New varieties including those with export potential as well as varieties capable of increasing land productivity
• Optimising land use by utilizing marginal lands and extending the activities of the new Organisation to non-rice areas including supplementary varieties such as reed and other crops
• Source markets local and international, develop products using the raw materials

There are a number of other areas where the new Organisation can play an important role. This could include provision of farming experts to help increase production in underperforming regions and ensuring effective water management. The activities of the new Organisation could well develop to buying beyond the production of its Members. By necessity, it will need to have a number of regional teams to deal with disputes, issues and problems within the farming community and its Members. Finally, the new Organisation will, by the very fact that it is Organised and Owned by its Members, become one of the largest representative groups in the country and as such will have enormous political clout with which to influence policy.
In conclusion, the model that develops will prove itself for adoption by other sectors within the Sri Lankan farming and production sectors and will serve the economic development of the country well for the future.