Vegetables prices are surging after devastating floods in early January, and experts believe hikes in rice prices may be next
MABOLA, Sri Lanka (AlertNet) - Neville Perera is getting used to calculating his sales in grams rather than in kilos.
The vegetable seller from Mabola, a town on the outskirts of the Sri Lankan capital of Colombo, says his sales have been suffering as vegetable prices rise sharply.
“No more sales in kilos,” he said. “People are now buying 250 grams, 300 grams of vegetables, enough for one meal.”
Vegetable prices, already on the rise in Sri Lanka, are now surging after devastating floods in early January that hit food production in the country. Experts warn more sharp increases may be around the corner, including in the country’s staple rice crop.
Since the beginning of the heavy rains in late December, vegetable prices at the Dambulla Economic Centre, the country’s largest vegetable distribution centre, have recorded increases over 80 percent, the United Nations said in a report detailing $51 million in flood assistance to Sri Lanka.
Market prices for vegetable released by the government’s Census and Statistics Department for the third week of January show steep price increases in some vegetables during the week of the floods. Costs for beans increased by 22 percent, cabbage by 18 percent and carrots by 20 percent.
Compared to a year ago, bean prices rose 55 percent and coconuts 70 percent. Some non-essential foods considered preferred additions to dishes rose even more over the year – red onions by 245 percent and chillies by 77 percent.
“Some vegetables just disappeared off the market (during the floods),” Perera said. Supplies have returned to more normal levels with the rains and the floods now easing, but the vegetable seller is far from confident that prices will come down.
“They were on the rise, and the rains just accelerated the process,” he said.
RICE PRICES TO RISE?
Economists warn that the surge in vegetable prices may soon be reflected in rice costs as well, as recent floods came just weeks before the flood-hit region’s main rice harvest.
“Vegetable prices fluctuate sharply because they are perishables,” said economist Muttukrishna Sarvananthan with the Point Pedro Institute of Development, an independent social science research institution based in far northern Sri Lanka. “The rise in vegetable prices may not last long.”
More worrisome, he said, was a potential loss of as much as 20 percent of the country’s rice harvest.
Calvin Piggott, of the U.N. Food and Agriculture Organisation’s Sri Lanka office has estimated, from initial reports, that 15.5 percent of the main rice harvest, or about $120 million worth of rice, was lost to January flooding.
Over 200,000 acres of rice paddy have been damaged out of about 1.5 million acres cultivated for the season, he estimated. The floods hit the districts of Ampara, Batticaloa, Polonnaruwa and Trincomalee that together account for one fifth of Sri Lanka’s cultivated paddy land.
Sarvananthan said he believed that rising global oil prices will also put more pressure on food prices.
“Loss of agriculture crops due to the floods and rising fuel prices in the world market are certain to push up inflation to double digit level in the first quarter of this year,” he said.
INFLATION PRESSURES
The Central Bank had earlier expected to keep inflation to a single digit figure in 2011. However, initial assessments by the Census and Statistics Department predicted inflation could rise to about 7.5 percent by the end of January, up from 6.9 percent in December, largely as a result of vegetable price increases, Sarvananthan said.
The government has said it will release buffer stocks of rice to the market to make up for harvest losses. But Sarvananthan fears imports may also be needed to make up an expected 20 percent harvest shortfall. With other countries also undergoing sharp food price hikes, importing rice may not help prevent national price increases.
“Food price rises are a global phenomenon,” he said.
Food makes up for around 45 percent of the basket of goods and services used to judge the country’s inflation rate, and rice – a staple – is the country’s most important foodstuff. According to data maintained by the Census and Statistics Department, an average Sri Lankan household consumes 36 kilograms of rice monthly, more than any other type of food.
As part of an effort to promote consumption of locally produced rice and help farmers, the government recently imposed taxes on wheat flour. The taxes, combined with growing national rice production – driven by generous government fertilizer subsidies and a return to production of rice paddies in conflict areas – have led to a fall in rice prices in Sri Lanka over the last year of between 10 to 30 percent. Wheat flour over the same period grew in cost by 31 percent.
Economists now worry, however, that the fall in prices will be reversed as a result of crop losses from flooding and higher prices for imported rice.
Amantha Perera is a freelance writer based in Sri Lanka.
Our Standards: The Thomson Reuters Trust Principles.
