Further to GIEWS' Special Alert No. 265 of February 1996, an on-the-spot assessment of the 1996 Yala crop and the overall food supply situation has just been completed by FAO/GIEWS. The assessment is based on field visits to the main areas affected in Kurunagula and Anuradhapura and on discussions with Government officials and representatives of international agencies. The main observations are as follows:
As a result of a significant decline in inter-monsoonal rainfall in October and November last year and an estimated 40 percent drop in rainfall from the North-eastern Monsoon beginning in December, there was a substantial decrease in the output of the main Maha rice crop, which normally accounts for some two-thirds of annual rice production. Latest estimates indicate that the 1995/96 crop amounted to approximately 1.3 million tons of paddy, some 22 percent lower than average for the preceding five years and 465 000 tons or 26 percent below the bumper harvest in 1994/95. The most significant decline in Maha production occurred in rainfed areas and minor irrigation schemes in the dry zone, principally around Kurunagala and Anuradhapura in central parts of the country, Hambantota in the south and Vavuniya, Kilinochchi, Mannar, Mullattivu and Jaffna in the North. Rainfall in the major producing provinces of Kurunagala and Anuradhapura in December, a critical month, was 20 percent and 13 percent respectively of the long-term average, whilst the corresponding fall in output, from the five-year average, was 54 percent and 27 percent respectively. In some districts it is reported that production fell by as much as 75 percent. Although less severe, output from major irrigation schemes in the Mahaweli programme also declined and was 17 percent below normal. In addition to paddy, other rainfed crops were also badly affected particularly maize, kurakkan, a coarse grain alternative to rice, green gram and soya.
The drought also resulted in a sharp reduction in water availability in irrigation reservoirs, with many of the smaller reservoirs drying up completely. Moreover, rainfall since April has also been deficient, resulting in highly unfavourable prospects for the Yala crop. In the period 1 April to 30 June, cumulative rainfall over Kurunagula and Anuradhapura was between 150 mm and 250 mm below normal, whilst in Hambantota Province the deficiency was between 50 mm and 100 mm. This has resulted in a sharp reduction in Yala area, not only in rainfed areas and minor irrigation schemes but also in the command area of the Mahaweli system. In addition to the reduction in overall area, in many parts planting has been delayed significantly, plant growth is highly stunted, yields are expected to decline substantially and crop losses are anticipated. The outlook, therefore, is poor and Yala production is currently forecast to fall to between 550 000 tons and 600 000 tons of paddy. Taking the higher estimate, production would be some 450 000 tons below 1995 and 33 percent below average for the preceding five years.
Total paddy production in 1995/96, is projected to be around 1.9 million tons, over 900 000 tons lower than 1994/95, 26 percent below normal and 11 percent below the last seriously drought-affected crop in 1986/87. Allowing for milling, seed and losses, this amount of paddy translates to around 1.3 million tons of rice.
In the run up to the 1995/96 Maha season, there were relatively large rice stocks in the country, almost entirely with the Paddy Marketing Board (PMB). These were a result of the bumper Maha and Yala harvest in 1994/95 and restricted off-take as demand for rice remained low due to increased consumption of wheat and bread, the prices of which were heavily subsidized. Added to this, there was a general perception that the 1995/96 Maha crop would also be favourable. In anticipation of this, and to reduce costs, PMB actively reduced stocks and an estimated 50 000 tons were released for exports around September 1995. PMB, therefore, had low stocks by the beginning of 1996. Low stocks and severely reduced production, mean that the country will have to import considerable quantities of rice this year to bridge the deficit. Although the final outcome of the Yala crop is yet to be determined, current projections indicate that some 600 000 tons of rice will need to be imported to meet requirement.
As a result of the shortfall in supply, the price of rice has increased considerably since the beginning of the year, with a brief respite around late February/March when limited Maha supplies came on to the market. The most notable increase in price occurred around late May/early June, reflecting shortages, deficient rainfall and poor prospects for the Yala crop. At the end of June the average prices of No. 1 raw, parboiled and Samba rice were 22.4, 23.0 and 24.6 rupees per kg respectively, some 30 percent higher than in January and between 16 and 27 percent higher than in June 1995. The substantial increase in the price of rice also comes at a time when the Government is cutting its subsidy on wheat and bread, in an attempt to control its budgetary deficit. As a result of the price increase in staples, inflation is likely to rise, which will affect consumers, particularly those in low income brackets.
As part of its reform policy, rice imports into the country are envisaged entirely through the private sector. To encourage these, in April the Government waived the 35 percent duty on imports. Originally this exemption was to run to the middle of October, though it is likely that it will be extended till early 1997. The Government is also likely to waive the stipulation that private traders keep an agreed minimum buffer at any given time. As of 10 July, some 30 000 tons of rice had been imported mostly in the preceding month. As a result prices have declined somewhat and are likely to fall further in August due to supplies in the market from the Yala harvest and additional imports. However, this may only be a temporary phenomenon and further price increases and food supply difficulties are possible in the lean period from October to January. During this time, price movements will depend on the scale and speed of imports through the private sector. Although, at present the Government is confident that the flow of imports will be adequate to check prices and counter supply difficulties, the situation needs close monitoring. Prices will also depend heavily on perceived prospects and final outcome of the 1996/97 Maha crop.
The Government estimates that a total of ten districts, covering 1.73 million people, were worst affected by the drought last Maha season and will require relief assistance. This does not take into account those who will be further affected by the shortfall in the Yala season. Many are subsistence farmers with less than half a hectare of land, whilst the remainder are agricultural labourers with severely reduced incomes. Although the Government already provides statutory assistance through a social welfare scheme, "Samurdhi", which assists low income sectors of the population, it is reported that most of the people affected live on one meal a day. Moreover, as Government assistance is partly in the form of fixed financial transfers, t is inevitable that any future increase in the price of rice and bread, will further constrain access to food of vulnerable people. The food situation in the north, where there are a large number of internally-displaced people receiving food assistance, is expected to become particularly tight as movement of food into affected areas is likely to be severely constrained by the recent deterioration in the security situation.