Required Report - public distribution

**Date:** 4/1/2005

**GAIN Report Number:** CE5002

CE5002

**Sri Lanka**

**Grain and Feed**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, New Delhi

**Prepared by:**

Adrian Mendis

**Report Highlights:**

Sri Lanka's marketing year (MY) 2005/06 (Oct-Sep) rice production is
forecast at 2.2 million tons, assuming favorable weather conditions and
the continuation of the peace process with the Tamil separatist group.
MY 2004/05 production, which was affected by floods and drought, is
estimated at around 2 million tons. Wheat imports in calendar year (CY)
2005 are forecast at 950,000 tons, marginally higher than CY 2004
imports. There were no wheat imports from the United States in 2004.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

New Delhi \[IN1\]

\[CE\]

**Table of Contents**

[**SECTION I - SITUATION & OUTLOOK 3**](#section-i---situation-outlook)

[RICE 3](#rice)

[Production Situation and Outlook 3](#production-situation-and-outlook)

[Consumption 3](#consumption)

[Trade 3](#trade)

[Marketing 4](#marketing)

[WHEAT 4](#wheat)

[Production 4](#production)

[Consumption 4](#consumption-1)

[Trade and Competition 4](#trade-and-competition)

[SECTION II -- STATISTICAL TABLES 5](#section-ii-statistical-tables)

[Table 1: Commodity, Rice Milled, PSD
5](#table-1-commodity-rice-milled-psd)

[Table 2: Commodity, Rice Milled, Import Trade Matrix
6](#table-2-commodity-rice-milled-import-trade-matrix)

[Table 3: Commodity, Wheat, PSD 7](#table-3-commodity-wheat-psd)

[Table 4: Commodity, Wheat, Import Trade Matrix
8](#table-4-commodity-wheat-import-trade-matrix)

[Table 5: Wheat Imports by Month, CY 2003 and CY 2004 by Country of
Origin
9](#table-5-wheat-imports-by-month-cy-2003-and-cy-2004-by-country-of-origin)

# SECTION I - SITUATION & OUTLOOK

## RICE

### Production Situation and Outlook

Sri Lanka's MY 2005/06 rice production is forecast at 2.2 million tons
(milled basis), assuming a normal rainfall during the northeast and the
southwest monsoon seasons this year, and the continuation of the
ceasefire agreement with the Tamil separatist group Liberation Tigers of
Tamil Elam (LTTE). The MY 2004/05 rice output, which was negatively
impacted by drought and floods, and to a small extent by the December
26, 2004, tsunami (mostly confined to some areas of the eastern and
southern provinces), is estimated at around 2.0 million tons. The MY
2004/05 production includes 651,000 tons of *yala* crop (harvested in
the fall of 2004) and 1.3 million tons of *maha* crop, which is
currently being harvested.

Rice is the most important crop in Sri Lanka, in terms of area and
production, number of farm families engaged, and political sensitivity.
It contributes around 4 percent to the country's GDP. About 42 percent
of the country's 870,000 hectares of total rice area has assured
irrigation, but the remaining area is entirely dependent on rains.
Although rice production has increased considerably over the past
fifteen years, sustainability problems have surfaced in recent years,
mainly in the high productive areas in the dry zone in the north central
province of the country. Micronutrient deficiency in the soil,
increasing production costs, reduced profits, stagnant yields, and poor
quality are some of the problems facing rice cultivation. Although most
farmers apply high doses of fertilizer, they neglect agronomic and pest
management practices, leading to poor yield response to these
applications. The production cost of a kilogram of rough rice is
approximately SL Rs. 9.00 (nine US cents), with labor remaining the most
costly input.

### Consumption

MY 2005/06 rice consumption is forecast to increase to 2.3 million tons
from 2.1 million tons in MY 2004/05. Annual per-capita rice consumption
is around 100 kilograms, and it provides 45 percent of the total calorie
requirement and 40 percent of the total protein requirement of an
average Sri Lankan. Consumption is influenced by the price of rice
vis-à-vis the price of substitutes like wheat flour and bread. In recent
years, there has been some shift from rice to flour-based foods, mainly
in urban areas, due to the convenience of the wheat-based foods. This
trend is expected to continue if rice prices remain strong. Prices of
most varieties of rice recorded a significant increase in CY 2004 over
2003. Retail rice prices ranged from SL Rs. 30-50 (30-50 US cents) per
kilogram in 2004, compared with SL Rs. 26-35 (26-35 US cents) per
kilogram in 2003.

### Trade

Rice imports in MY 2005/06 are forecast at 150,000 tons, compared with
215,000 tons in MY 2004/05. The present tariff on rice is SL Rs. 9 per
kilogram. Rice imports increased sharply in November and December 2004
following the waiver of tariffs on rice imported by the Sri Lanka
Cooperative Federation in September 2004, and then by all importers in
October 2004, in order to control domestic prices. Sri Lanka imports low
quality rice mostly from India and Pakistan. In CY 2004, Sri Lanka
imported 40 tons of rice from the United States.

### Marketing

For CY 2005, the government of Sri Lanka (GSL) approved SL Rs. 750
million (\$7.5 million) for the paddy price support operation, at prices
ranging from SL Rs. 15.50-16.50 (16-17 US cents) per kilogram. Annual
paddy purchases by the GSL are only about 9 percent of total production,
with private traders the primary buyers. The paddy purchased by the GSL
is stored in government warehouses, and is released regularly to keep
retail prices under control.

## WHEAT

### Production

There is no wheat production in Sri Lanka. The country's entire wheat
needs are met through imports.

### Consumption

CY 2005 wheat consumption is forecast at 950,000 tons, marginally higher
than the MY 2004 consumption. Annual per-capita flour consumption
averages around 50 kilograms, which could expand if rice prices
increase. Sri Lankan consumers' preference, particularly in urban areas,
has been shifting towards flour-based foods due to their cooking
convenience and price competitiveness. The availability of a wide range
of ready-to-eat wheat-based food products has further supported wheat
consumption.

Prima (Ceylon) Ltd, the country's sole flourmill, supplies all of Sri
Lanka's flour requirements. However, recently the GSL encouraged flour
imports and also began importing flour directly through the Trade
Ministry in order to break the Prima monopoly in the domestic flour
market. Following the withdrawal of the subsidy paid to Prima, effective
March 01, 2005, Prima increased the retail price of flour to Rs. 34.50
per kilogram; the Trade Ministry meanwhile established a sales price of
Rs. 27 per kilogram for wheat flour imported by it. The Minister of
Trade also expressed willingness to provide duty-free status and VAT
concessions to private sector flour importers, in addition to providing
distribution channels for their imported flour, to attract private
imports. The constant pressure by successive governments to maintain
prices at levels affordable to the average consumer has limited Prima's
ability to produce superior quality flour. Flour distributed by Prima in
CY 2004 totaled 630,786 tons, a slight decrease from the 644,846 tons in
2003. Wheat flour imported and distributed in CY 2004 totaled 3,430
tons. A second flourmill (a joint venture between a Sri Lankan Company
and a UAE-based investor) in the vicinity of the Colombo port, which was
scheduled to be operational in 2005, has been delayed, and is now
scheduled to be commissioned in 2007.

### Trade and Competition

CY 2005 wheat imports are forecast at 950,000 tons, compared with
945,000 tons (all commercial) in CY 2004. There were no wheat imports
from the United States in 2004 due to their relatively higher prices.
Imports were mostly from Australia, Argentina, India, and Canada. Prima
prefers to buy wheat from Australia to blend it with cheaper wheat
imported from neighboring countries like India. The GSL's strategy of
importing wheat flour to break Prima's monopoly opens limited
opportunities for the supply of US wheat flour to Sri Lanka, provided
prices are competitive.

# SECTION II -- STATISTICAL TABLES

## Table 1: Commodity, Rice Milled, PSD

+------------+-------+-------+-------+-------+-------+-------+-----+
| **PSD      |       |       |       |       |       |       |     |
| Table**    |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| *          | **Sri |       |       |       |       |       |     |
| *Country** | La    |       |       |       |       |       |     |
|            | nka** |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| **C        | **    |       |       |       | (1000 |       |     |
| ommodity** | Rice, |       |       |       | HA)   |       |     |
|            | Mil   |       |       |       |       |       |     |
|            | led** |       |       |       | (1000 |       |     |
|            |       |       |       |       | MT)   |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
|            | 2003  | Re    | 2004  | Est   | 2005  | For   | UOM |
|            |       | vised |       | imate |       | ecast |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
|            | USDA  | Post  | USDA  | Post  | USDA  | Post  |     |
|            | Off   | Est   | Off   | Est   | Off   | Est   |     |
|            | icial | imate | icial | imate | icial | imate |     |
|            |       |       |       |       |       |       |     |
|            | \[    | \[    | \[    | \[    | \[    | \[    |     |
|            | Old\] | New\] | Old\] | New\] | Old\] | New\] |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| **Market   |       | 10    |       | 10    |       | 10    | M   |
| Year       |       | /2003 |       | /2004 |       | /2005 | M/Y |
| Begin**    |       |       |       |       |       |       | YYY |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Area       | 810   | 806   | 810   | 789   | 0     | 800   | (1  |
| Harvested  |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | HA) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Beginning  | 156   | 156   | 10    | 10    | 60    | 60    | (1  |
| Stocks     |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Milled     | 1900  | 1900  | 2000  | 1974  | 0     | 2200  | (1  |
| Production |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Rough      | 2794  | 2794  | 2857  | 2903  | 0     | 3235  | (1  |
| Production |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| MILLING    | 6800  | 6800  | 7000  | 6800  | 0     | 6800  | (1  |
| RATE       |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
| (.9999)    |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| TOTAL      | 29    | 29    | 150   | 215   | 0     | 150   | (1  |
| Imports    |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Jan-Dec    | 150   | 215   | 150   | 150   | 0     | 150   | (1  |
| Imports    |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Jan-Dec    | 0     | 0     | 0     | 0     | 0     | 0     | (1  |
| Import     |       |       |       |       |       |       | 000 |
| U.S.       |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| **TOTAL    | **2   | **2   | **2   | **2   | *     | **2   | (1  |
| SUPPLY**   | 085** | 085** | 160** | 199** | *60** | 410** | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| TOTAL      | 0     | 0     | 0     | 0     | 0     | 0     | (1  |
| Exports    |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Jan-Dec    | 0     | 0     | 0     | 0     | 0     | 0     | (1  |
| Exports    |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| TOTAL Dom. | 2075  | 2075  | 2100  | 2139  | 0     | 2300  | (1  |
|            |       |       |       |       |       |       | 000 |
| C          |       |       |       |       |       |       | MT) |
| onsumption |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Ending     | 10    | 10    | 60    | 60    | 0     | 110   | (1  |
| Stocks     |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| **TOTAL**  | **2   | **2   | **2   | **2   | **0** | **2   | (1  |
|            | 085** | 085** | 160** | 199** |       | 410** | 000 |
| **DIST     |       |       |       |       |       |       | MT) |
| RIBUTION** |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+

## Table 2: Commodity, Rice Milled, Import Trade Matrix

  ----------------------- --------------- ------------------ -------------
  **Import Trade Matrix**                                    

  **Country**             Sri Lanka                          

  **Commodity**           Rice, Milled                       

  Time Period             Jan-Dec         Units:             Jan-Dec

  Imports for:            2003                               **2004**

  U.S.                    0               U.S.               0

  Others                                  Others             

  India                   13482           India              145867

  Pakistan                12403           Pakistan           55833

                                          Japan              6122

                                          Italy              5353

                                                              

                                                              

                                                              

                                                              

                                                              

                                                              

  Total for Others        25885                              213175

  Others not Listed       7747                               1825

  Grand Total             33632                              215000
  ----------------------- --------------- ------------------ -------------

## Table 3: Commodity, Wheat, PSD

+------------+-------+-------+-------+-------+-------+-------+-----+
| **PSD      |       |       |       |       |       |       |     |
| Table**    |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| ######     | **Sri |       |       |       |       |       |     |
| Country {# | La    |       |       |       |       |       |     |
| country-1} | nka** |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| **C        | **Wh  |       |       |       | (1000 |       |     |
| ommodity** | eat** |       |       |       | HA)   |       |     |
|            |       |       |       |       |       |       |     |
|            |       |       |       |       | (1000 |       |     |
|            |       |       |       |       | MT)   |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
|            | 2003  | Re    | 2004  | Est   | 2005  | For   | UOM |
|            |       | vised |       | imate |       | ecast |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
|            | USDA  | Post  | USDA  | Post  | USDA  | Post  |     |
|            | Off   | Est   | Off   | Est   | Off   | Est   |     |
|            | icial | imate | icial | imate | icial | imate |     |
|            |       |       |       |       |       |       |     |
|            | \[    | \[    | \[    | \[    | \[    | \[    |     |
|            | Old\] | New\] | Old\] | New\] | Old\] | New\] |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| ####       |       | 01    |       | 01    |       | 01    | M   |
| ## Market  |       | /2003 |       | /2004 |       | /2005 | M/Y |
| Year Begin |       |       |       |       |       |       | YYY |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Area       | 0     | 0     | 0     | 0     | 0     | 0     | (1  |
| Harvested  |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | HA) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Beginning  | 100   | 100   | 100   | 100   | 100   | 100   | (1  |
| Stocks     |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Production | 0     | 0     | 0     | 0     | 0     | 0     | (1  |
|            |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| TOTAL Mkt. | 900   | 987   | 950   | 945   | 0     | 950   | (1  |
| Yr.        |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
| Imports    |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Jul-Jun    | 886   | 950   | 950   | 959   | 0     | 950   | (1  |
| Imports    |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Jul-Jun    | 15    | 0     | 0     | 0     | 0     | 0     | (1  |
| Import     |       |       |       |       |       |       | 000 |
| U.S.       |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| **TOTAL    | **1   | **1   | **1   | **1   | **    | **1   | (1  |
| SUPPLY**   | 000** | 057** | 050** | 045** | 100** | 050** | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| TOTAL Mkt. | 10    | 0     | 0     | 0     | 0     | 0     | (1  |
| Yr.        |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
| Exports    |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Jul-Jun    | 10    | 0     | 0     | 0     | 0     | 0     | (1  |
| Exports    |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Feed Dom.  | 0     | 0     | 0     | 0     | 0     | 0     | (1  |
|            |       |       |       |       |       |       | 000 |
| C          |       |       |       |       |       |       | MT) |
| onsumption |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| TOTAL Dom. | 890   | 987   | 950   | 945   | 0     | 950   | (1  |
|            |       |       |       |       |       |       | 000 |
| C          |       |       |       |       |       |       | MT) |
| onsumption |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+
| Ending     | 100   | 100   | 100   | 100   | 0     | 100   | (1  |
| Stocks     |       |       |       |       |       |       | 000 |
|            |       |       |       |       |       |       | MT) |
+------------+-------+-------+-------+-------+-------+-------+-----+
| **TOTAL**  | **1   | **1   | **1   | **1   | **0** | **1   | (1  |
|            | 000** | 057** | 050** | 045** |       | 050** | 000 |
| **DIST     |       |       |       |       |       |       | MT) |
| RIBUTION** |       |       |       |       |       |       |     |
+------------+-------+-------+-------+-------+-------+-------+-----+

## Table 4: Commodity, Wheat, Import Trade Matrix

  ------------------------ ------------- ------------------ -------------
  **Import Trade Matrix**                                    

  **Country**              Sri Lanka                         

  **Commodity**            Wheat                             

  Time Period              Jan-Dec       Units:             Jan-Dec

  Imports for:             2003                             **2004**

  U.S.                     52500         U.S.               0

  Others                                 Others             

  India                    413650        Australia          273818

  France                   332273        Argentina          229543

  Canada                   105000        India              197917

                                         Canada             99973

                                                             

                                                             

                                                             

                                                             

                                                             

                                                             

  Total for Others         850923                           801251

  Others not Listed        83577                            143749

  Grand Total              987000                           945000
  ------------------------ ------------- ------------------ -------------

## Table 5: Wheat Imports by Month, CY 2003 and CY 2004 by Country of Origin

(metric tons)

  ----------- ---------- ---------- ---------- ---------- ---------- ----------
              **2003**                         **2004**              

              US         Non-US 1/  Total      US         Non-US 1/  Total

  January     52,500     81,422     133,922    0          78,316     78,316

  February    0          87,157     87,157     0          70,367     70,367

  March       0          42,853     42,853     0          127,855    127,855

  April       0          41,547     41,547     0          69,021     69,021

  May         0          176,570    176,570    0          24,529     24,529

  June        0          80,206     80,206     0          83,270     83,270

  July        0          24,677     24,677     0          71,320     71,320

  August      0          119,662    119,662    0          128,305    128,305

  September   0          69,324     69,324     0          1,524      1,524

  October     0          27,523     27,523     0          191,375    191,375

  November    0          77,013     77,013     0          32,382     32,382

  December    0          106,546    106,546    0          67,023     67,023

  Total       52,500     934,500    987,000    0          945,287    945,287
  ----------- ---------- ---------- ---------- ---------- ---------- ----------

1/ Non-US includes India, Australia, France, Canada, etc