An Analysis of Price Behaviour of Rice in Sri Lanka after the Liberalization of Economy

Abstract

Wholesale prices as well as retail prices of rice have increased sharply towards the end of 2007 and 2008. The present per kg price of Samba (small round grain), Kakulu (raw) rice and Nadu (par-boiled) have reached Rs. 70.00, Rs 65.00 and Rs. 50.00 respectively. The objectives of the study were to identify the price behaviour of rice in Sri Lanka after the liberalization of economy while developing the appropriate price forecasting model for rice and to identify the farmers perception on high rice price in resent past. Nominal market price for Samba, Nadu, and Kakulu rice were collected from different secondary sources in year wise basis. Further, a survey was carried out to measure the farmers’ perception on high rice prices in the recent past. Forty five farmers in Thissamaharama DS division were randomly selected to collect the primary data. Year-wise nominal market price (NMP) of all types of rice had increased continuously. It was recorded 7.0, 7.8 and 6.0 percent per annum for Samba, Nadu and Kakulu ride, respectively. However, the real market prices (RMP) of Sanba, Nadu and Kakulu rice have decreased by 4, 3, and 5 percent per annum, respectively. The Compound Growth Rate model was most appropriate model to analyze the price behaviour of Samba and Nadu rice while Quadratic model was suitable for Kakulu rice in term of NMP. Further, CGR model was suitable to analyze the price behaviour of Samba while Quadratic model was suitable for Nadu and Kakulu rice in terms of RMP. However, 44.4 % of farmers have satisfied with the high rice price. Further, 33.3 % have mentioned that it has not helped to increase the profit since increment of the cost of production at same time. According to the farmers’ view, price increment was a result of oligopolistic behaviour of middlemen and insufficient government involvement to control the price.