Sri Lanka waking up to reality of food shortages after failed organic farming dream

The repercussions of banning chemical fertilizer imports in Sri Lanka with little planning has weighed heavily on the country's farming industry. Sri Lanka now faces an impending food shortage resulting from reduced domestic production, along with the financial inability to import supply.

The plight of agriculture in Sri Lanka started with government's decision to ban chemical fertilizers in May 2021, which was later revoked in November. The ban on fertilizers and agrochemicals into the country was an attempt to kill not just two but three birds with one stone: cutting on import bills, being known for organic produce, and save farmers from diseases loosely linked to chemical use.

In 2020, Sri Lankan imports of foreign fertilizers amounted to $259 million. Indicators were pointing to the bill reaching $300 million-$400 million in 2021-22 given high prices, a US Department of Agriculture report said.

Implications of a fertilizer ban

Several agriculture experts have agreed that the government's decision to ban fertilizer imports was hasty and underthought.

According to a survey by Verite Research, a Colombo-based think tank, Sri Lankan farmers were broadly supportive of the government policy to transition to organic fertilizer, but they wanted more time to make the transition.

Verite Research found that there was a lack of know-how among farmers to transition to organic farming and they expected huge reduction in harvest under current restrictions.

A USDA report also cited Sri Lanka's inability in the short term to expand the country's organic fertilizer production capacity sufficiently to meet current fertilizer consumption.

"Sri Lanka's leading agricultural economists indicate that the immediate, non-phased-in replacement of chemical fertilizers with organic ones, will result in significant drops in crop yields," the USDA report said. "Rice productivity drops are being calculated to potentially lead to losses of 33%. A similar 35% percent productivity drop in the tea crop, can result in income losses of LKR 84 billion."

Prior to the ban, the Sri Lankan government subsidized rice production to ensure rice self-sufficiency by providing local rice farmers with free chemical fertilizers. For other field crops, the government provided farmers with fertilizers at deeply discounted cost.

As a result of the sudden ban, overall food production in Sri Lanka in the last harvest season was 40%-50% lower than last year, the United Nation's Food and Agriculture Organization said.

Sri Lanka harvests rice twice a year in two rain cycles – Maha (main) and Yala (lesser). The Maha rice is sown in September and harvested by March, while the Yala cycle begins with planting in May and ends with harvest in August. According to Sri Lanka's Department of Census and Statistics, rice production in Sri Lanka's main harvest season in MY 2021-22 fell by almost 40% on the year to 1.93 million mt.

Muddy road ahead

Meanwhile, current seed and fertilizer shortages as well as lack of credit for food producers also threaten the current Yala production cycle. This means Sri Lanka will be needing grain imports to meet its domestic requirement, but the country might not have the finances to do so due to further depreciation of its local currency.

"Sri Lanka's protracted drought of foreign exchange continues to severely impact the country's ability to purchase essential imports, including certain foodstuffs and energy products," said Andrew Wood, a sovereign analyst at S&P Global Ratings.

Even beyond the next season, the path for Sri Lankan farmers might not be without struggles, experts said.

Sri Lanka was just coming out of the grip of a pandemic and lockdowns, which has been devastating for an economy that heavily relied on tourism.

"And then there's an economic crisis, a political crisis, a food crisis – all in all leading to a humanitarian crisis," said G Chandrashekhar, an India-based policy commentator and agribusiness specialist. "On a small scale, farmers may be able to plant seeds and grow some vegetables, but the large scale operations like [rice] paddy cultivation will be challenged by the lack of fuel and agrochemicals.

He added that farmers will struggle throughout the rest of 2022, and even into next year.

"There will be no miracle," he said.

Chandrashekhar emphasized that the neighboring country India should help Sri Lanka to come out of the current crisis. India has provided aid to Sri Lanka in form of fertilizers and agricultural commodities, local reports said.

"A stabilization in the domestic situation could create a window for official lenders to provide more immediate assistance, potentially mitigating near-term humanitarian and economic hardship," S&P Global Ratings' Wood said.

However, negotiation and agreement on hard-hitting policy measures are likely to be required to establish a broader reform and funding program with the IMF, he added.