Required Report - Public distribution

**Date:** 4/1/2008

**GAIN Report Number:** CE8003

CE8003

**Sri Lanka**

**Grain and Feed**

**Annual**

**2008**

**Approved by:**

![](media/image1.wmf)Holly Higgins

U.S. Embassy

**Prepared by:**

Adrian Mendis

**Report Highlights:**

Assuming favorable weather conditions, Sri Lanka's MY 2008/09 (Oct -
Sep) rice production is forecast at 2.2 million tons, unchanged from the
MY 2007/08 estimate. Wheat imports in CY 2007 declined to 850,000 tons
from 1.2 million tons in CY 2006 due to high international prices. CY
2008 imports are forecast at 900,000 tons. After a long gap, Sri Lanka
imported two shiploads of U.S. wheat totaling around 110,000 tons in CY
2007.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

New Delhi \[IN1\]

\[CE\]

**Table of Contents**

[RICE 3](#rice)

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

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

[Consumption 4](#consumption)

[Trade 4](#trade)

[Import Trade Matrix 4](#import-trade-matrix)

[Marketing 4](#marketing)

[WHEAT 5](#wheat)

[Table 2: Commodity, Wheat, PSD 5](#table-2-commodity-wheat-psd)

[Production 5](#production)

[Consumption 5](#consumption-1)

[Trade and Competition 6](#trade-and-competition)

[Import Trade Matrix 6](#import-trade-matrix-1)

[Wheat Imports by Month (metric ton)
7](#wheat-imports-by-month-metric-ton)

# RICE

## Table 1: Commodity, Rice, Milled, PSD

<table>
<colgroup>
<col style="width: 18%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>PSD Table</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Country</strong></td>
<td colspan="2"><strong>Sri Lanka</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Commodity</strong></td>
<td colspan="2"><strong>Rice, Milled</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"><p>(1000 HA)</p>
<p>(1000 MT)</p>
<p>(MT/HA)</p></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>2006</td>
<td>Revised</td>
<td></td>
<td>2007</td>
<td>Estimate</td>
<td></td>
<td>2008</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>01/2006</td>
<td>01/2006</td>
<td></td>
<td>01/2007</td>
<td>01/2007</td>
<td></td>
<td>01/2008</td>
<td>01/2008</td>
</tr>
<tr class="odd">
<td>Area Harvested</td>
<td>846</td>
<td>846</td>
<td>846</td>
<td>800</td>
<td>800</td>
<td>800</td>
<td>0</td>
<td>0</td>
<td>852</td>
</tr>
<tr class="even">
<td>Beginning Stocks</td>
<td>60</td>
<td>60</td>
<td>60</td>
<td>56</td>
<td>60</td>
<td>60</td>
<td>61</td>
<td>50</td>
<td>45</td>
</tr>
<tr class="odd">
<td>Milled Production</td>
<td>2145</td>
<td>2145</td>
<td>2145</td>
<td>2200</td>
<td>2200</td>
<td>2200</td>
<td>0</td>
<td>0</td>
<td>2194</td>
</tr>
<tr class="even">
<td>Rough Production</td>
<td>3154</td>
<td>3154</td>
<td>3154</td>
<td>3235</td>
<td>3235</td>
<td>3235</td>
<td>0</td>
<td>0</td>
<td>3226</td>
</tr>
<tr class="odd">
<td>Milling Rate (.9999)</td>
<td>6800</td>
<td>6800</td>
<td>6800</td>
<td>6800</td>
<td>6800</td>
<td>6800</td>
<td>0</td>
<td>0</td>
<td>6800</td>
</tr>
<tr class="even">
<td>MY Imports</td>
<td>50</td>
<td>11</td>
<td>11</td>
<td>55</td>
<td>15</td>
<td>75</td>
<td>0</td>
<td>0</td>
<td>70</td>
</tr>
<tr class="odd">
<td>TY Imports</td>
<td>50</td>
<td>11</td>
<td>11</td>
<td>55</td>
<td>15</td>
<td>75</td>
<td>0</td>
<td>0</td>
<td>70</td>
</tr>
<tr class="even">
<td>TY Imp. from U.S.</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Total Supply</td>
<td>2255</td>
<td>2216</td>
<td>2216</td>
<td>2311</td>
<td>2275</td>
<td>2335</td>
<td>61</td>
<td>50</td>
<td>2309</td>
</tr>
<tr class="even">
<td>MY Exports</td>
<td>4</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>TY Exports</td>
<td>4</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Total Consumption</td>
<td>2195</td>
<td>2156</td>
<td>2156</td>
<td>2250</td>
<td>2225</td>
<td>2290</td>
<td>0</td>
<td>0</td>
<td>2270</td>
</tr>
<tr class="odd">
<td>Ending Stocks</td>
<td>56</td>
<td>60</td>
<td>60</td>
<td>61</td>
<td>50</td>
<td>45</td>
<td>0</td>
<td>0</td>
<td>39</td>
</tr>
<tr class="even">
<td>Total Distribution</td>
<td>2255</td>
<td>2216</td>
<td>2216</td>
<td>2311</td>
<td>2275</td>
<td>2335</td>
<td>0</td>
<td>0</td>
<td>2309</td>
</tr>
<tr class="odd">
<td>Yield (Rough)</td>
<td>3.728132</td>
<td>3.728132</td>
<td>3.728132</td>
<td>4.04375</td>
<td>4.04375</td>
<td>4.04375</td>
<td>0</td>
<td>0</td>
<td>3.786385</td>
</tr>
</tbody>
</table>

### Production Situation and Outlook

Sri Lanka's MY 2008/09 rice production is forecast at 2.2 million tons
(milled basis), assuming favorable weather conditions and a stable
political environment. The resumption of hostilities in 2006 has
affected rice farming in some areas of the northern-province. However,
the major rice growing eastern province has remained unaffected by the
turmoil. Rice production in MY 2007/08 is officially estimated at 2.2
million tons, which includes a *yala* crop (harvested in the fall of
2007) of around 800,000 tons, and a *maha* crop, currently being
harvested, of 1.4 million tons. However, recent untimely heavy rains
have damaged the standing rice crop in major paddy producing areas,
which could result in a downward revision in MY 2007/08 production, once
a clearer picture emerges of the crop-loss.

Eastern districts account for about one-third of the country's rice
production, with about 19 percent of the total production concentrated
in Ampara district alone. The Northern Province is the second largest
rice growing region, accounting for about 18 percent of national
production. Although the retail rice price has increased sharply in
recent months, farmers allegedly are not benefitting from the high
prices due to inadequate marketing channels and lack of on-farm storage
facilities, which force them to sell their produce at low prices. Water
management is a challenge, particularly in the \'dry zone\', as only 42
percent of total rice area (about 870,000 hectares) has assured
irrigation.

### Consumption

Rice is the most preferred staple in Sri Lanka and accounts for the
largest share of household food expenditure. With annual per capita
consumption of around 100 kilograms, rice is the major source of calorie
(45 percent) and protein (40 percent) in the Sri Lankan diet. Although
prevailing high rice prices are affecting consumption in the short term,
consumption is expected to grow in the long-term, as the government is
encouraging citizens to substitute rice for wheat to reduce the
dependency on imported wheat and flour. Retail rice prices ranged from
Rs. 40 (50 cents) to Rs. 100 (\$1) per kilogram in 2007.

### Trade 

Rice imports in CY 2008 are forecast at 70,000 tons, compared with
85,000 tons imported in CY 2007. The current import tariff on rice is 20
percent. The GSL typically applies a seasonal tariff on rice to protect
domestic farmers. Sri Lanka imports rice mainly from India and Pakistan,
and smaller volumes from Australia and Thailand. Under the Sri
Lanka/Pakistan free trade agreement, 6,000 tons of basmati rice imports
are allowed duty free during the lean production season.

### 

### Import Trade Matrix

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

  **Country**           Sri Lanka                             

  **Commodity**         Rice, Milled                          

  Time Period           Jan-Dec           Units:              metric ton

  Imports for:          2006                                  **2007**

  U.S.                                    U.S.                 

  Others                                  Others              

  Pakistan              9,805             India               52,590

  India                 623               Pakistan            22,630

                                                               

                                                               

                                                               

                                                               

                                                               

                                                               

                                                               

                                                               

  Total for Others      10,428                                75,220

  Others not Listed     572                                   0

  Grand Total           11,000                                75,220
  --------------------- ----------------- ------------------- -----------

### Marketing

The government and private trade handle paddy marketing in the country.
The government has re-established the Paddy Marketing Board, which will
oversee government paddy purchasing. The wholesalers in the Colombo
market handle an estimated 60 percent of the total paddy production.
Multiple and fragmented supply chains, lack of market information,
difficulty in accessing the market in the conflict affected northern and
eastern provinces are factors contributing to low price realization by
farmers.

# 

# WHEAT

## 

## Table 2: Commodity, Wheat, PSD

### 

<table style="width:100%;">
<colgroup>
<col style="width: 19%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>PSD Table</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Country</strong></td>
<td colspan="2"><strong>Sri Lanka</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Commodity</strong></td>
<td colspan="2"><strong>Wheat</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"><p>(1000 HA)</p>
<p>(1000 MT)</p>
<p>(MT/HA)</p></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>2006</td>
<td>Revised</td>
<td></td>
<td>2007</td>
<td>Estimate</td>
<td></td>
<td>2008</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>01/2006</td>
<td>01/2006</td>
<td></td>
<td>01/2007</td>
<td>01/2007</td>
<td></td>
<td>01/2008</td>
<td>01/2008</td>
</tr>
<tr class="odd">
<td>Area Harvested</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Beginning Stocks</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>105</td>
</tr>
<tr class="odd">
<td>Production</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>MY Imports</td>
<td>1025</td>
<td>1170</td>
<td>1170</td>
<td>1000</td>
<td>1000</td>
<td>855</td>
<td>0</td>
<td>0</td>
<td>900</td>
</tr>
<tr class="odd">
<td>TY Imports</td>
<td>1025</td>
<td>950</td>
<td>950</td>
<td>1000</td>
<td>0</td>
<td>855</td>
<td>0</td>
<td>0</td>
<td>900</td>
</tr>
<tr class="even">
<td>TY Imp. from U.S.</td>
<td>58</td>
<td>9</td>
<td>9</td>
<td>0</td>
<td>0</td>
<td>115</td>
<td>0</td>
<td>0</td>
<td>100</td>
</tr>
<tr class="odd">
<td><strong>Total Supply</strong></td>
<td><strong>1125</strong></td>
<td><strong>1270</strong></td>
<td><strong>1270</strong></td>
<td><strong>1100</strong></td>
<td><strong>1100</strong></td>
<td><strong>955</strong></td>
<td><strong>100</strong></td>
<td><strong>100</strong></td>
<td><strong>1005</strong></td>
</tr>
<tr class="even">
<td>MY Exports</td>
<td>208</td>
<td>0</td>
<td>0</td>
<td>200</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>TY Exports</td>
<td>208</td>
<td>0</td>
<td>0</td>
<td>200</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Feed Consumption</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>FSI Consumption</td>
<td>817</td>
<td>1170</td>
<td>1170</td>
<td>800</td>
<td>1000</td>
<td>850</td>
<td>0</td>
<td>0</td>
<td>945</td>
</tr>
<tr class="even">
<td>Total Consumption</td>
<td>817</td>
<td>1170</td>
<td>1170</td>
<td>800</td>
<td>1000</td>
<td>850</td>
<td>0</td>
<td>0</td>
<td>945</td>
</tr>
<tr class="odd">
<td>Ending Stocks</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>100</td>
<td>105</td>
<td>0</td>
<td>0</td>
<td>60</td>
</tr>
<tr class="even">
<td><strong>Total Distribution</strong></td>
<td><strong>1125</strong></td>
<td><strong>1270</strong></td>
<td><strong>1270</strong></td>
<td><strong>1100</strong></td>
<td><strong>1100</strong></td>
<td><strong>955</strong></td>
<td><strong>0</strong></td>
<td><strong>0</strong></td>
<td><strong>1005</strong></td>
</tr>
<tr class="odd">
<td>Yield</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
</tbody>
</table>

### 

### 

### Production

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

### Consumption

High domestic flour prices in response to high international prices
resulted in a decline in wheat consumption in CY 2007. Furthermore, the
Sri Lankan government is encouraging its citizens to substitute rice for
wheat to reduce the dependency on imported wheat. Average monthly
consumption of wheat flour and bread per household is currently placed
at 3.1 kg and 7.4 kg, respectively.

Prima Ceylon Ltd., a Singaporean firm, is the largest flourmill in Sri
Lanka, which supplies most of the country's flour requirements. The
company has a milling capacity of 3,600 tons per day and is one of the
largest mills under a single complex in the world. In 2002, Prima was
able to upgrade its port operation, which now has the capacity to berth
larger bulk vessels. A second flourmill near Colombo is expected to
provide more competition in flour production.

The government considers wheat flour an essential food item. Mills are
not allowed to revise flour prices without the government's permission
but there were several sharp hikes in flour prices in 2007, which has
retarded flour consumption. Wheat flour now attracts a 15 percent import
tariff. A preferential tariff is applicable to imports from Pakistan at
10 percent. The government revises tariffs depending on domestic and
international market conditions. The current import duty on wheat is 6
percent.

### Trade and Competition

CY 2008 wheat imports are forecast at around 900,000 tons. Wheat imports
in CY 2007 declined to 850,000, mostly from Canada, from 1.2 million
tons in CY 2006 due to high international prices. Commercial wheat
imports from the U.S. resumed in 2007 after a long gap with two
shipments totaling 115,000 tons.

### Import Trade Matrix

  ---------------------- ------------- ----------------- -----------------
  **Country**            Sri Lanka                       

  **Commodity**          Wheat                           

  Time Period            Jan-Dec       Units:            Metric Tons

  Imports for:           2006                            2007

  U.S.                   8,780         U.S.              114,600

  Others                               Others            

  Canada                 1,154,754     Canada            693,156

  Australia              9,724         China             25,872

                                                          

  Total for others       1,164,478                       719,028

  Others not listed                                      21,958

  Grand total            1,173,258                       855,586
  ---------------------- ------------- ----------------- -----------------

###  

###  

### Wheat Imports by Month (metric ton)

  ----------- ---------- ------------ ----------- ---------- ------------ -----------
              **2006**                            **2007**                

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

  January     8,780      48,663       57,443      0          66,199       66,199

  February    0          70,137       70,137      0          65,459       65,459

  March       0          132,188      132,188     0          72,522       72,522

  April       0          61,000       61,000      56,716     108,587      164,927

  May         0          123,300      123,300     57,876     65,048       123,300

  June        0          137,053      137,053     0          62,204       62,204

  July        0          132,702      132,702     0          70           70

  August      0          68,871       68,871      0          94           94

  September   0          129,488      129,488     0          94           94

  October     0          0            0           0          46           46

  November    0          128,771      128,771     0          0            0

  December    0          132,305      132,305     0          300,671      300,671

  Total       8,780      1,164,478    1,173,258   114,592    740,994      855,586
  ----------- ---------- ------------ ----------- ---------- ------------ -----------

**1/** Non-US includes India, Australia, Argentina, Canada, etc.

##