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Business


Revamp agriculture to counter rising food prices

Rocketing food prices are triggering food riots from Bangladesh to South Africa. In Sierra Leone the price of a bag of rice has doubled, becoming unaffordable for 90% of citizen. The poor spend about 60% of their income on food purchases and when prices increase by 20-25% they will be driven into malnutrition as they cut down on food consumption. The prices of staple foods like wheat, corn and rice have almost doubled. Over the last three years, according to the World Bank, global food prices have increased by 83 per cent.

The unusual feature of the current situation is that the price spike applies to almost all major food and feed commodities, rather than just a few of them. We also have high local inflation due not only to rise in food prices but also to demand induced fiscal expansion. Inflation reduces the purchasing power of the low income earners. Domestic inflation must be held down although food price controls may not work.

In the short term, food prices look set to ease somewhat, particularly if (as now seems likely) the Northern hemisphere enjoys a good wheat crop. So there is no need to panic.

But we need to keep the long term trend in mind. A UN/World Bank study said that food prices would remain volatile as a result of rising populations and biofuel growth, that global demand for food was set to double in the next 25-50 years, primarily in developing nations. As a result, they said that it was necessary for the agricultural sector to grow.

The World Bank estimates that food production will need to grow by another 50 per cent by 2030 to fulfill projected demand. We have to pay more attention to agriculture particularly food production.

We must do a serious study of the ways and means of increasing our food supply over the next twenty years. What is the availability of land for agriculture? In the past we expanded agriculture by opening up the Dry Zone and providing irrigation facilities. Many tanks were restored and then the Mahaweli River was diverted to the Dry Zone. But the scope for such expansion is over. If the war ends soon there will be greater availability of food and fish from the conflict zone.

We have had to depend on improving yields by introducing new seed varieties requiring fertilizers and chemicals pesticides. But with the increase in oil prices these agricultural inputs too have gone up in price. The cost of urea has tripled since 2003.

The high energy prices must be taken into account in re-fashioning a new agricultural policy. Experts must study what sort of agriculture we must now concentrate on. If we have to expand cultivation extensively then we have only the less productive land to be cultivated. They may be subject to diminishing returns, since much of the best land is already under cultivation. Farmers have abandoned paddy lands in the wet zone because it is not profitable to cultivate them. Above all, there is increasing competition for what land there is, including food, feed, forest conservation, and demands of urbanisation.

There are also high rates of soil loss to erosion. Different views have been expressed at different times by agricultural experts. We need to know for sure the availability of arable land for extending agriculture for it will determine whether we should go for extensive or intensive agriculture. This is important in the face of several new factors that have emerged on the world scene.

Water scarcity is also likely to become a more pressing issue. Scientists are talking of climate change not as a matter for the future but for the immediate future or even as a matter of a few years. We have recently experienced unusual weather with severe flooding. Climate experts say that extreme weather is likely to make the biggest difference to food security. They say glacial melting will affect agriculture as well: that many Himalayan glaciers could disappear by 2035, with catastrophic results for Chinese and Indian agriculture during the dry season. So building buffer stocks is very necessary.

Many of these factors, on both the supply and the demand side also apply to fisheries and aquaculture.
Demand for fish and seafood is rising sharply, again largely because of increasing affluence. But while the

FAO estimates that an additional 40 million tonnes of aquatic food a year will be needed by 2030, it also notes that catches of wild fish have remained roughly stable since the mid-1980s, at around 90 million tonnes a year, and forecasts that this figure is unlikely to rise substantially. These underlying trends will place increasing emphasis on aquaculture, which last year accounted for 43 per cent of fish consumption (up from just 9 per cent in 1980). However, future expansion of the sector will depend not only on increasing investment capital, but also on availability of land, fresh water and energy – which as noted above, are all already subject to stresses of their own.

Poor people typically spend a high proportion of their income on food purchases: In our case 60% of expenditure of the low income classes is spent on food. Of particular concern are landless poor people in rural areas and the Estate population. Most poor people are net food buyers, who are unlikely to be compensated fully by, additional employment as agriculture grows, or by higher wages. However, the extent and rapidity of current rises mean that urban populations are also being hit, as World Food Programme head Josette

Sheeran recently noted: ‘There is food on shelves but people are priced out of the market. There is vulnerability in urban areas we have not seen before.

But although poor countries should in theory be able to benefit from rising prices for agricultural commodities, the reality is that they are held back by poor infrastructure, the need for better access to markets, technology and finance, restrictive supply chain standards and other barriers as well.

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             Nude Food: A solution to the food crisis              

Around the world, organic farming is increasingly being viewed as imperative for the survival of agriculture, and in Sri Lanka there is clear evidence to support this.

In the past few decades, agricultural productivity in Sri Lanka has generally been on the decline. Agriculture has been characterized by falling government investment, poor quality produce, degraded soil, and high post harvest losses; while low productivity is also viewed as a factor contributing significantly to rural poverty.

However, a switch to organic could see the reversal of Sri Lankan agriculture’s fortunes, largely due to the condition of the country’s soil.

By Samantha Whybrow
Nude Food: it’s not about naked vegetables (who knew they wore clothes anyway), and you can definitely keep your shorts on while eating it.

Nude Food is a new concept café in the heart of Colombo that is part of a business revolution aimed at changing the way we think about our health, food, and the environment.

There is another food crisis going on, you see. We do not hear much about it amidst present headline grabbing phrases such as “world food shortage” and “food prices set to soar”.

It is the crisis of harmful pesticides degrading soils and thereby reducing their productivity; the crisis of chickens fed with so many growth hormones men are starting to develop breasts; the crisis of deforestation and inappropriate farming methods that are contributing to hunger, malnutrition, poor harvests, and massive price hikes in certain agricultural commodities.

This is not a story about being a vegetarian, or being a ‘greenie’ a ‘hippie’ or a ‘yogi’—we are talking business, after all. Instead, it is a story about how some Sri Lankan businesses are turning their passion for healthy people living on a healthy planet into a profit-making venture by going organic.

Organic profits

Profit is secondary to most companies that sell organic produce (though perhaps not the farmers), yet there is a good deal of money to be made in the sector.

For a start, organic foodstuffs attract a price premium; in the US and other western markets organic produce retails at 20 to 100 percent above non-organic food-stuffs.

According to Dhammika Gunasekara, Director of Lanka Organics—one of the biggest organic exporters in the country—the price premium works to the advantage of Sri Lankan agricultural exporters, and is one reason for farmers to consider switching to organic production.

“The cost of Sri Lankan agricultural commodities is usually quite high compared to other countries like Vietnam. But, by going organic, we can compete internationally because organic produce fetches such a high premium,” says Gunasekara.

Another positive sign for organic producers is that demand is also on the rise as consumers in western countries become more alert to the perceived health and environmental benefits of organic products.

In the UK alone, 70 percent of the baby food market is now organic, while sales of organic products overall increased by 22 percent in the country last year.

In the meantime, the global organic food market grew by 13.6% in 2006 to reach a value of USD36.7 billion—a figure that is forecast to more than double, to USD67.1 billion, by 2011.

Eyeing the potential profits, many developing countries are getting in on the act. Latin American nations, for example, are some of the largest organic exporters of organic food in the world.

While, closer to home, the Indian government initiated several programmes and invested around USD22 million into sustainable agriculture a few years back to help its farmers increase the country’s organic output. This has seen the value of the country’s organic exports increase significantly—rising by 187 percent to USD75 million in 2007

Sustainable farming
Back home, organic farming is also on the rise thanks to the efforts of some dedicated farmers—an estimated 3000 of them—with the assistance and vision of some key organisations whose primary motive is the concept of a healthy planet.

“We are concept-oriented rather than profit or product-oriented,” says Dhammika Gunasekara of Lanka Organics.
“Of course, we are in business, we have to make money, but what we really want is to produce in an ethical manner, being conscious of the environment and communities so that we naturally produce a better product.”

Lanka Organics is an example of a growing number of businesses in the country that are looking to put back what they take out; in this case “putting back” by using farming methods that enhance the nutritional content of the soil rather than deplete it.

It also gives back to farmers through providing a steady and reliable source of income, and helps them to maximize their profits by eliminating the notorious middleman.

“We have over 1000 smallholder farmers who supply our produce and we invest a great deal of time and money in teaching them how to farm organically,” explains Gunasekara, whose company exports organic spices, fruits, teas, kitthul, cashews, coconute products, and health snacks.

While definitions vary, organic farming is generally considered to be a planned procedure that works entirely with natural processes and involves the farm generating fertility from its own resources.

Composts made from cow manure, household, and garden wastes are commonly used to enrich crops and soils, while crop rotation is routine practice in order to ‘rest’ the soil from time to time.

Materials such as growth hormones, synthetic chemicals, and antibiotics are prohibited, and produce undergoes stringent certification from official international bodies before any crops or animals (organic chickens and meat are also classified) can be given the organic tick of approval.

The idea of sustainability of the land is central to organic farming and is why the typical home garden in Kandy is not considered truly organic, even if hazardous chemicals are not used on crops.
“You cannot be organic by default. You have to make sure that you deliberately create systems that replenish the soil in an organic manner,” says Gunasekara, who points out that is one of the reasons farmers need support.

Sri Lankan imperative

Around the world, organic farming is increasingly being viewed as imperative for the survival of agriculture, and in Sri Lanka there is clear evidence to support this.

In the past few decades, agricultural productivity in Sri Lanka has generally been on the decline. Agriculture has been characterised by falling government investment, poor quality produce, degraded soil, and high post harvest losses; while low productivity is also viewed as a factor contributing significantly to rural poverty.

However, a switch to organic could see the reversal of Sri Lankan agriculture’s fortunes, largely due to the condition of the country’s soil.

“The soil in tropical countries does not fare well against the ill-effects of prolonged chemical fertilizer and pesticide applications, which are commonly used today,” says Sally Michel, co-owner of Sri Lanka’s first organic café, Nude Foods at ODEL.

“And since tropical countries have poorer soils to start with, they are more affected by the repeated application of such chemicals. The farming benefits seen by using these chemicals are short-lived and productivity soon declines,” says Michel, who backs her statements up with documentary research conducted in Sri Lanka.

Gunasekara agrees, explaining, “The tea industry, which has relied on chemical fertilizer application for years, is one sector where it is plain to the effects of this, with increasingly nutrient poor soils contributing to poor yields.”

The other imperative to make a switch is, of course, the matter of the increasing cost of chemical fertilizers, with prices rising dramatically in the past year and contributing significantly to the final cost of production of agricultural produce.

Organic farming cleverly avoids such high input costs, according to Gunasekara, through careful and planned use of the land.
“We carefully plan and manage the land with farmers as part of the process. For example, we make sure they plant a lot of green matter when they start the farm and that goes towards the mulching,” says Gunasekara.
Organic farming has also been proven to help lift small farmers from poverty, according to research findings presented at the World Bank.

“Farmers in developing countries who switch to organic agriculture achieve higher earnings and a better standard of living,” reported the Bank after considering a study conducted in India, Latin America, and China.

In Sri Lanka, there is already evidence of this.
Gunasekara points out that his company is able to secure stable prices for its 1000 smallhold farmers, making them less vulnerable to price variations in the market.

While a study of organic cashew cultivation in Hambantota by the Export Development Board found that premium prices helped farmer livelihoods, with the added benefit that farmers were further compensated by learning to cultivate other organic produce between cashew trees that they were also able to sell at a premium price.

Sri Lankan advantage

Organic farming is comparatively labour intensive, which is the main reason the cost of organic food is so high in western countries; organic farms in those countries have to charge more for their produce since they pay more for their labour.
But this is good news for developing countries, where labour is comparatively cheaper. Though Sri Lanka, according to Gunasekara, has other advantages.

While there were an estimated 15,215 hectares of land under organic management in 2006—representing a paultry 0.65 percent share of agricultural land—most of the land on the island is farmed by smallholders.

“This makes the risk factor in converting to organic farming much smaller than it would be for large plantations,” says Gunasekara, who adds that with the cost of fertilizer skyrocketing, organic farming offers smallholders an alternative that is potentially much more lucrative.

The government, which has slowly been waking up to the benefits of organic farming, is also now working towards a plan to help the organic food movement on the island, although it will undoubtedly have to address the issue of fertilizer subsidies if it is to succeed.

If it’s so good then why…
But, if organic farming is as good for people and the environment as it is made out to be, then why aren’t more farmers getting involved, and why aren’t more Sri Lankans eating it?
One of the major drawbacks is that organic certification is a costly exercise. Lanka Organics spends around 7000 Euros each year just to have its farms certified. Certification is essential; without it, there is no price premium.
“Smallholders simply cannot afford to pay the price of certification, which is why there is a need for co-operatives,” says Gunasekara.

Also, making the change to organic takes three years—the time taken for soils to be clear of chemicals.
“A lot of farmers won’t wait that long. They are looking at short-term gains only,” explains Gunasekara, who also points out the government’s fertilizer subsidy acts as a disincentive for farmers to go organic.

Meanwhile, consumption-wise, Sri Lankan consumers are generally not aware of the benefits of organic produce according to Sally Michel who notes most of the people who initially came to her café were foreigners or people who had been abroad and were exposed to the organic food movement.

“That’s changing now, though, and we get more Sri Lankans coming in and people who are asking a lot of questions,” says Sally, who expects the Sri Lankan organic food movement will take time to evolve.

And more changes are afoot. Aside from its café fare, Nude Foods now sells boxes of organic produce to its customers—filled with fruits, eggs, chickens, spices, and teas—which it sources direct from organic smallholders around the country.

Meanwhile, Lanka Organics has been selling the organic range of coffee, spices, dried fruits, and cashews at ODEL for a few years now. The company has also started selling its organic papayas in Keells supermarkets.

Fortunately for Sri Lankans, organic food is not that much more expensive than regular produce, and sometimes it is cheaper.
“We set up a stall in Food City recently, and much of our produce was actually cheaper than the non-organic produce,” says Gunasekara.
Health, environmental, and cost benefits aside, most organic foodies are quick to tell you that organic food simply tastes better.
And watching the satisfied smile on people’s faces as they eat a Nude Food organic lasagna, it definitely seems worth a try.

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