Production and marketing of ginger through Forward Sales Contracts: A case study in Galagedara

Abstract

Ginger (Zingiber officinale) is mainly used for manufacturing oil, oleoresin, essence, soft drinks, non-alcoholic beverages, medicines and perfumery. Sri Lanka produces about 5,000 metric tons of ginger and also imports about 2,000 metric tons annually. Ginger is mainly grown in homestead areas in Sri Lanka. The cultivation of ginger was not much popular in Galagedara area until year 2003. The commercial cultivation of ginger was introduced to the area, under the “Gov/ sahanaya" system by the Central Bank of Sri Lanka. Presently, 120 farmers have entered the commercial ginger cultivation covering 22 ha including both uplands and lowlands in Galagedara area. Kandurata Development Bank (KDB) provides loans valued Rs.90,000 per 0.4 ha for ginger cultivation. Ceylon Cold Stores (CCS) purchases ginger at a reasonable price under forward contract system. Necessary quality and quantity requirements are 2.5cm long ginger rhizomes of indigenous variety sliced in to 10 and dried them well. Farmers are allowed to sell a minimum of 500kg dried ginger produced from 0.4ha of land. Forward Sales Contracts (FSC) have been signed by farmers, Ceylon Cold Stores and Kandurata Development Bank. This formal Forward Sales Contract mechanism is a triparticipate arrangement among the farmers, buyers and the bank. The farmers produce average 8,289 kg of ginger/year/ha spending average Rs.2,42,889. Farmers sell ginger as dried ginger or seed rhizomes. The marketing channels of ginger are very straight and have a simple marketing system. Farmers sell seed rhizomes directly to colleague farmers or sell dried ginger to the company through formal contract basis. All ginger farmers in the area are the members o f “Ginger Farmer Organization”. This farmer organization is maintaining a close relationship with KDB. It helps the farmers in obtaining loans at correct time and provides various support services to the member farmers. Farmers are able to present their problems and difficulties to buyer (CCS) through the farmer organization. The price of ginger is decided through a discuss all the parties including farmers, company representatives, bank and Agriculture Instructor of the area. Majority of the farmers accept the price as a better price. CCS pays Rs.375 per (Proceedings o f the.Sixth Annual Research Session o f Aprictdiumf Graduates. University of<Sufiuna I kg of dried ginger and Rs.100 per I kg of seed rhizomes. The money transactions are solely done by the KDB based on the pre-determined contract price. The FSC for ginger production has got a direct effect in increasing income of the farmers. Hence it is important to apply the experience of Galagedara to promote ginger cultivation in other ginger producing areas and to improve the welfare of farming society.