Sri Lanka is a country rich in natural resources and traditional values and eco-friendly agricultural practices. Therefore, people, especially in the past moved to things that were of quality and nutritious for their lives. However, when focusing on Sri Lankan food and beverages market at the present, still organic food has a narrow market in which the level of consumption is very low. Therefore, this study aims to identify the factors influencing consumers’ organic food buying behaviour in Sri Lanka. Data were collected from 200 consumers who purchase organic foods in the Kegalle divisional secretariate division through a survey conducted using a structured questionnaire. The data were analyzed using Pearson's correlation coefficients, analysis of variance, and multiple regression techniques from Minitab-17 statistical software. The results revealed that cultural, personal, social, economic, and psychological factors that have a clear positive relationship with the consumers’ organic food buying behaviour while both psychological and personal factors have a powerful significant impact on organic food buying behaviour.
Cinnamon is the most valuable and important spice export crop in Sri Lanka which accounts over 85% of the world cinnamon exports. Competitiveness is one of the major challenges in cinnamon trade in an era of free trade. Intense competition faced by Sri Lanka with other countries results in adverse impacts on cinnamon trade thus decreasing its potential trading opportunities. This study aims to analyze the export competitiveness of Sri Lankan cinnamon in the world market. The study also considers the world’s top 10 cinnamon exporters. The contribution of this paper is that it measures the comparative advantage using a range of indexes namely the Balassa Revealed Comparative Advantage Index (BRCA), Additive Revealed Comparative Advantage Index (ARCA), Normalized Revealed Comparative Advantage Index (NRCA), Revealed Symmetric Comparative Advantage Index (RSCA) and Trade Balance Index (TBI) for the period from 2001 to 2020. Data are extracted from the International Trade Center (ITC) trade map (COMTRADE) database. BRCA (566.49), ARCA (0.01207), NRCA (7.28*10-6), and RSCA (0.996) result indicate that Sri Lanka has the highest comparative advantage in the global cinnamon export market. Madagascar (0.999) has the highest TBI value. The result of product mapping indicates that Sri Lanka, Madagascar, Vietnam, Indonesia and China have both comparative advantage and positive trade balances over other countries.
This study attempted to analyze the volatility of the retail price of coconuts using monthly time series data from January 1991 to July 2020 and forecast the same for July 2020 to June 2021. The analysis found the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) (1,1) model as the best fit model. Coefficients of past values of the error term and conditional variance are positive and significant indicating positive impacts on the prevailing price volatility. Coefficients of lagged values of conditional variance and error terms are 0.771 and 0.179 respectively. The study concludes that the volatility shocks persist, and the model is appropriate to forecast the retail price of coconuts in Sri Lanka.
This study estimates the output supply response of coconut in major producing countries using the cointegration approach. Regional variations in the domestic coconut production in Sri Lanka, India (represented by the state of Kerala), and the Philippines were captured by applying a Vector Error Correction Model (VECM). National aggregate time series data for the period 1970-2019 were used in the analysis. The empirical results show that unique long-run equilibrium relationships exist among coconut production, the coconut price, and the climate variable in three individual markets and the panel estimation. The regional disparities are revealed by the short-run dynamics throughout the analysis. Altogether, the econometric estimates provide strong evidence that the coconut producers respond rationally to the changes in own price and other supply determinants. However, both short and long-run price elasticities of the coconut supply response are rather low amidst its significance, suggesting that any pricing policy requires a comparatively long lead time for it to become effective in accelerating production. Furthermore, the estimated panel VECM can be further developed and validated to be used as a tool to analyze the regional deviances for assisting the policymakers in making comprehensive strategies to ensure the industry’s long-term sustainability.
This paper applied a stochastic frontier model to measure total factor productivity growth, technical efficiency change, and technical change in tea production in the estate sector in Sri Lanka. Monthly data from 35 tea estates relating to the period 2005 to 2019 were used. Two functional forms with two distributional assumptions were tested. A Translog production frontier with the inefficiency term distributed as a truncated normal distribution was found to be the best fit for data. Results revealed that on average estate sector tea production operates 48% below the potential output indicating possibilities of increasing performance without any significant changes in inputs. Further, the overall rate of technical progress was estimated at 0.002 percent per year. The overall rate of technical efficiency change declined by 0.013 percent per year. The combined effect of slow technical progress, dominated by the fall in technical efficiency resulted in the decline in the total factor productivity in the corporate tea sector at a rate of 0.002 percent per year. This net effect of declining Total Factor Productivity raises concerns about the sustainability of the tea sector in Sri Lanka in the long run. Policies to shift up the production frontier and improvements in managerial practices to combat declining efficiency levels are recommended.
The purpose of this study was to find out the effect of migration on the livelihood security of the estate sector in Sri Lanka as none of the other reported studies covered livelihood security issues with respect to whole country. Data for the study come from the Household Income and Expenditure Survey (2016) conducted by the Department of Census and Statistics of Sri Lanka. A composite index approach was applied to construct the livelihood security index which was formulated based on economic security, food security, education security, health security, and habitat security. The propensity score matching (PSM) method was employed to illustrate the impact of migration and remittances on livelihood security and its outcomes, while addressing the self-selection problem. Average treatment effect (ATT) results showed significant differences in ATT effect of remittances on economic security, food security, and education security, and no significant difference in ATT of receiving remittances with health security and habitat security. Remittance receiving households consisted of high education security and health security than the non-remittance-receiving households with low economic security, food security, and habitat security. The study concludes that migration and remittances affect livelihood security of estate sector households positively.
The adoption of recommended practices in agriculture boosts production and thereby increases farmer income. It ensures that scarce resources are optimally utilized. Awareness and perception of recommendations are precursors to adoption in the rubber smallholder sector. This research tested the causal links between awareness, perception and adoption. Data were collected using a pretested questionnaire covering four rubber growing districts. Three indices were developed for awareness, perception and adoption. Three behavioral equations were developed to estimate the relationship between awareness, perception and adoption and they were simultaneously estimated using a three stage least square technique. Results revealed that awareness of recommendations significantly influences perception and the perception in turn significantly influences adoption and therefore, the link between these was clear. The role of extension effort is significant in creating awareness while peer effect and human capital significantly assist in formation of favorable perception on technologies.
Participation in off-farm employment is a strategy adopted by farmers in many developing countries to increase and stabilize their incomes. However, empirical evidence on its effects on management of natural resources is context specific. This study examines the pattern on labor use with special emphasis on determinants and potential effects of participation in off-farm employment by the villagers reside in Thirappane tank cascade system in Sri Lanka. Data gathered from a primary survey conducted among 134 households were used for analysis. The results of probit models revealed that the farmers who possess agricultural assets have a higher probability of joining employment in other-farms and those who are educated and own large farms participate in non-farm sector employment. Community management of the village tank cascade systems will be challenging owing to the increased interest in off-farm activities by the able.
Sri Lankan tea industry is confronting the danger of losing key markets on the grounds of exceeding the Maximum Residual Levels (MRLs) in chemicals permitted by the European Union. This study assesses the impact of Non-tariff measures on Sri Lankan tea exports because of MRLs stipulated for the pesticide, Endosulfan. This study employs a Bayesian version of the Gravity equation using a Multi-level Mixed Model, because of the additional advantages that Bayesian analysis provides. Panel data from 2003 to 2017 for fourteen prime destinations of Ceylon tea were considered for this study. The estimated coefficient of MLR for Endosulfan suggests that a 1% increase in the regulatory stringency on Endosulfan (tighter restrictions on pesticide) can result in a 0.67% (approximately US$ 8,907,708.15 in 2020) decrease and a 1% increase in the tariff rate is prompt to a 0.03% (approximately US$ 398, 852.60 in 2020) decline in the value of tea exports. Compared to the tariff, the MRL is associated with a higher impact on trade. Therefore, the negative impact of MRLs is found to outweigh the impact of import tariffs, highlighting the greater role that non-tariff measures play.
This study developed a set of composite indices to analyse the vulnerability to climate change of the agricultural sector in Sri Lanka using the data between 2001 and 2018. The aim was to identify the level of vulnerability of the agricultural sector to climate risks at the country level, as a tool to better understand the variability and magnitude of impacts and adaptive capacities required to overcome the risks due to climate change. To calculate the indices, environmental and socio-economic indicators representing the conceptual components of vulnerability, namely, exposure, sensitivity, and adaptive capacity were selected based on previous studies. Secondary data were collected for the selected indicators and normalised considering the indicator's functional relationship to vulnerability. Normalised data were then weighted and aggregated using two weighting methods and two aggregation methods to calculate four vulnerability indices, in order to minimize the impact of the known limitations of the methodological approaches to create composite indices. The values for composite indices were standardised to the range 0-1 and divided into five levels of vulnerability based on equal intervals, which revealed a moderate level of agricultural vulnerability to climate change over the eighteen-year study period. The multidimensional assessment, further, revealed the upward trend of vulnerability due to the increased sensitivity of the system to climate change. Even though the adaptive capacity of the country has been strengthened in the recent past, it has a critical role to play in mitigating vulnerability. The study also suggests methods for predicting future vulnerability by replicating the calculations.
Large variability in yields and input usages have been evident in coconut plantations of Sri Lanka. The studies on the determinants of productivity of coconut lands mainly adopted Ordinary Least Square estimation which only provides overall effects at the mean. This study examines the determinants of land productivity in different land classes of coconut plantations using a Quantile Regression approach which allows the computation of the effect of each determinant in each quantile. Production functions of coconut were specified treating coconut yields as the dependent variable and bearing coconut palms, labor, fertilizer, agrochemicals, machinery usage, and rainfall as the independent variables in Cobb-Douglas form. Annual data from nine estates belong to Kurunegala Plantations Ltd. of Sri Lanka from 2000 to 2018 were used for the analysis. The results indicate that on average, fertilizer usage, agrochemical usage, number of bearing palms and rainfall have positive and significant effects on coconut production. It was found that OLS estimates underestimate and overestimate the input use efficiency at upper and lower quantiles respectively. Rainfall was found to be a significant factor in determining the coconut yield in each quantile except the 90 quantile indicating that investments in irrigation which facilitates soil moisture improvement during dry periods would be important in improving the production. The application of fertilizer and other chemicals to the coconut lands in between the 60 and the 90 quantiles would be more effective. In contrast QR provided meaningful information at different segments in the production that enables to design appropriate structural policies steering the optimal use of inputs in coconut plantations.
Climate-Smart Agriculture (CSA) technologies have been introduced to mitigate adverse climate change impacts. However, the adaptation of CSA technologies by farmers is relatively low in the dry zone of Sri Lanka. This study focuses on how farmers’ adaptation behavior for CSA technologies varies with household characteristics, economic status, and farm characteristics. Data on 94 farmers were collected using a pre-tested questionnaire. A score was developed for each farmer on the adaptation of CSA technologies under 4 broad categories namely: water and energy-smart, nutrient and soil-smart, carbon and weather-smart, and knowledge and yield-smart. A generalized linear model (GLM) was employed to identify the factors that influence farmers’ adaptation and the level of adaptation. According to GLM results, income increases the adaptation of water and energy-smart technologies, while land ownership and managing livestock compared to labour decrease the adaptation. Adaptation of nutrient and soil-smart technologies were positively influenced by experience, and training while negatively influenced by labor use and managing livestock compared to crops. Adaptation of carbon and weather-smart technologies were positively influenced by income, cost of transport, higher education levels, managing both crop and livestock compared to only crop, and training while negatively influenced by the gender of the household head and household size, source of income, and land ownership. Knowledge and yield-smart technologies were positively influenced by income, level of education, and training while negatively influenced by only managing livestock compared to crops. Overall, the results suggest the importance of providing training and facilitating knowledge dissemination in addition to understanding the subtle issues that act as barriers to the adaptation of CSA technologies in dry zone farming.
Using a nationally representative data set, we examine whether the individuals’ bargaining power within households affects allocation of remittances in estate households in Sri Lanka. Two separate fractional logit models were estimated within the Engle’s Curve framework for male headed and female headed households to examine the intra household bargaining on decision making with respect to resource allocation. The results suggest that while female headed households allocate international remittances on food, male headed households allocate such on housing. The results further reveal that internal remittances contribute more for food, communication, entertainment, non-durables, transport and ad hoc purchases of male headed households. The influence of remitters on allocation for the food expenditure is relatively small but it is high for education, housing, health, consumer goods, durables and expenditure for ad hoc purchases, entertainment and transport. Overall, the study concludes that remitter has a greater say over the allocation of household resources over expenditures other than food and housing whereas household head play a significant role in allocating remittances on food and housing.
This paper attempts to identify the causal relationship between rising of real effective exchange rate and the export performance in Sri Lanka for the period of 2000 to 2016. Study employed a Gravity model approach using a panel data set of 174 trading partner countries. The study finds that there is no significant impact of rising of exchange rate on export performance during the period of study. It is also found that GDP, distance, FDI, country being landlocked, global financial crisis and ending of civil war have a significant impact on export performance of the country.
This paper examines the determinants of the seafood trade and their nature of relationship in Sri Lankan context. The analysis was done using a comprehensive panel data set covering 107 importing countries for time period 2001-2017. The economic sizes of the importer and Sri Lanka have a positive influence on seafood export values while the physical distance, tariff rate, non-tariff measures, and population of importer have a negative impact. There was no long-run association among those variables but seafood exports have shown a short-run causality with GDP of importing countries, tariff and non-tariff measures.
The drastic drop in fuel prices and the resulting fiscal constraints have compelled oil exporting countries to phase down fuel subsidies. The government of Oman raised gas prices for industrial users by 100% in 2015 with 3% annual increase, and in early 2016 increased oil fuel prices by 33% with possibility of monthly adjustments, in future. The increase in the fuel prices resulted to an increase in domestic food prices too. The phasing down of fuel subsidies would influence poverty and household food security in Oman. In this context, the objective of the study is to quantitatively analyze the impact and sensitivity of food and fuel price changes on incidence of poverty in Oman. This study uses a simulation model developed by the World Bank that estimates the impact of increase in food and fuel prices on poverty incidence and the required fiscal allocation to neutralize the poverty incidence. The results indicate that poverty incidence is responsive to fuel price changes in Oman. It is estimated that increase of fuel prices by 33% increases poverty incidence by 1% from current baseline of 12.78%. The financial transfer that is required to neutralize poverty incidence due to increase of fuel prices by 33% is substantially lower than the savings made by phasing down fuel subsidies. The government could use the existing mechanism and institutions of social security provisions to target and provide financial transfers to poor household that would be adversely affected by phasing down of fuel subsidies.
Extensive cattle rearing system is predominant among rural dairy farmers in Sri Lanka, where the selections and opportunities for other economic activities are limited. In Sri Lanka, approximately 60-70% of domestic dairy requirement is still dependent on imports due to the lack of domestic milk production. In this context, the study was carried out to a) analyse technical efficiency and b) its determinants of dairy production in rural areas of Batticaloa district in the Eastern Province of Sri Lanka in order to facilitate the dairy productivity. Manmunai South West Division is one of the poorest divisions in Batticaloa, which contributes 11.4 per cent to the total cattle population in the district. Data were collected from randomly selected 52 farmers using a structured survey schedule during November to December in 2016. Data on herd composition, input costs, and output per year immediately preceding the current period were collected. Cobb Douglas production function was used to model input-output relationships. Stochastic Frontier was estimated using Stata 13 and Technical Efficiency (TE) of the sample was estimated. TE scores were regressed against the selected farm and producer characteristics to find determinants of technical inefficiency. Regression coefficients of the proportion of improved/cross bred cows and the proportion of cows in lactation were positive in Stochastic Frontier model. Regression coefficients of age of the farmer, education level and herd size were negative in inefficiency model, which reflected the higher values of these variables, reduce inefficiency. The average TE of the sample was implying that there is about 50% scope of improving the production with the same input level. The study concludes that increasing the proportion of improved/cross bred cows and proportion of cows in lactation as potential interventions in increasing efficiency of farmers from rural areas of Batticaloa who follow extensive management system.
In this paper, efforts were made to estimate the impact of stall feeding (SF) technology on households’ milk production and consumption, market participation as well as land conservation in rural Northern Ethiopia using data obtained from a survey of 518 rural farmers. Using endogenous switching regression models, we estimate different outcome indicators for both adopters from adopting SF (ATT), and non-adopters had they adopted (ATU). The values of ATT and ATU show that SF adoption increased milk production, consumption expenditure, number of plantation and of physical construction, propensity of participating in animal market sale and growing trees in their plots.
The relationship between inflation rate and inflation volatility has attracted more attention by theoretical and empirical macroeconomists. Empirical studies on the relationship between food inflation and food inflation variability is scarce in the literature. This study examines the intertemporal dynamic linkages between food price inflation and its volatility in the context of Sri Lanka. The empirical evidence derived from the monthly data for the period from 2003M1 to 2017M12 for Sri Lanka. Food price inflation is defined as log difference of food price series. The volatility of a food price inflation is measured by conditional variance generated by the FIGARCH model. Granger causality tests show that food inflation seems to exert positive impact on inflation variability. Hence, the findings of the study supports the Friedman hypothesis in both cases of consumer food price inflation and wholesale food price inflation. This implies that past information on food inflation can help improve the one-step-ahead prediction of food inflation variability but not vice versa. Our results have some important policy implications for the design of monetary policy, thereby promoting macroeconomic stability.
The Sri Lankan coconut industry is facing intense competition due to increasing demand from local consumption and export processing while fresh nut production is stagnating. The situation is aggravated during weather extremes especially with prolonged droughts. The recent prolonged drought of nearly two years was the cause for temporary closure of processing industries and soaring nut prices. It may take more than a year to re-establish normal yield even with the onset of rainfall in October. Therefore, importation of coconuts as a strategy was explored in this study. An Equilibrium Displacement Model (EDM) was used to quantify the possible economic impact and its distribution among industry stakeholders. The results indicated that allowing imports is economically viable for the processing industries to recover their losses. Under the simulated scenarios where input substitution is a policy condition to be zero, reducing the costs of processing of desiccated coconut through fresh nut importation reduces the losses to the processors and exporters from 15.5 LKR million per year to about 5.5 LKR million per year. Consumers of desiccated coconut exports are also better off by around 45 LKR million under the above scenario of a price reduction of fresh nuts from 43 LKR to 32 LKR. However, still there are concerns for the existence of markets produced from foreign material and export substitution. Moreover, the compliance with the quarantine regulations especially for the risk of pest and disease outbreaks remains unresolved. Therefore, dehusked-coconut importation is still not an option for a severe coconut shortage while other semi-processed products may remain potential alternatives.
