Modelling a Marketing-based Solution for the Paddy Marketing Crisis in Sri Lanka: Case of the Upuldeniya Warehouse Storage Receipt System

R P I R Prasanna

doi:10.4038/pmr.v1i2.28

Abstract

The issue of paddy marketing characterizes the paddy sector crisis, as farmers cannot realize the expected price at the harvesting period due to the bulk of supply. This paper attempts to study the effectiveness of a new marketing-based model – Warehouse Storage Receipt System (WSRS) - to solve the paddy sector crisis in Sri Lanka. Primary data for the study were drawn from field surveys conducted among farmers and traders in the Huruluwewa Agriculture Colonization Scheme in the Anuradhapura district, and in-depth interviews were conducted among the officers in the Upuldeniya WSRS in the scheme. A descriptive-analytical technique was employed in the study due to the nature of the investigated problem. The results first indicated that a majority of paddy farmers sell their harvest during the harvesting period at the lowest price, leading to inadequate net income from paddy farming. Secondly, the study revealed the oligopolistic nature of paddy marketing structure, since a few large-scale traders handle a substantial share of the farmers’ production. The lower financial capability of the farmers to cover variable costs of paddy farming and pre-modern economic characteristics of the paddy marketing channel have allowed large-scale traders to grab the farmers’ production at a minimum price during the harvesting period. Thirdly, WSRS evaluation has revealed that the farmers could enhance the net income of paddy farming by adequately marketing their harvest via the WSRS, as it improves the harvest holding capability of farmers until they realize a Farmer Expected Price (FEP). The study modelled that the WSRS leads to improve market competition through supply management, and thereby gradually increases the price at the harvesting period and shortens the price movement period to create equilibrium, which has been the farmers’ expectation.

Highlights

As cited in the literature, the main crisis of paddy farming in Sri Lanka is the insufficient profit derived from spending a large amount of money on farming (Prasanna & Ranathilake, 2018)
As the scheme was established in the 1950s, and the third and fourth generation of initially settled people are farming in the area, the farmers’ situation in the area is believed to provide a suitable illustration of the overall marketing condition of paddy farming in Sri Lanka
Three research questions were answered – what are the causes why the guaranteed price scheme (GPS) cannot be realized at the harvesting time? How is the existing problem conceptualized? And how are the existing conceptual options modelled to solve the problem of less profitability of paddy farming in Sri Lanka?

Summary

Introduction

As cited in the literature, the main crisis of paddy farming in Sri Lanka is the insufficient profit derived from spending a large amount of money on farming (Prasanna & Ranathilake, 2018). There is no considerable heterogeneity of paddy varieties produced by the farmers in terms of quality and shape, and a broad price variation of different rice varieties cannot be observed in the market. It indicates the homogeneity of the farmer product – paddy. The weaknesses of government paddy purchasing mechanism, weak socioeconomic status of farmers at the harvesting time, oligopolistic nature of the rice marketing channel, and the lack of support of agriculture-related institutions were primarily documented (Damayanthi, 2006; Henegedara, 2006; Wijesooriya et al, 2017; Prasanna, 2018; Ranathilaka & Arachchi, 2019)

Objectives

Methods

Results

Conclusion