An analysis of price behaviour of rice in Sri Lanka after liberalization of economy

Abstract

Wholesale prices as well as retail prices of rice increased sharply towards the end of 2007 and 2008. The year 2008/09 rice prices of Samba, Kakulu and Nadu rice have reached Rs 70, Rs 65 and Rs 50 respectively. Therefore, the objective of this study were to identify the price behaviour of rice in Sri Lanka, to develop the appropriate price forecasting model for rice and to identify the farmers’ perception on high rice price in resent past. Year wise nominal market price for Samba, Nadu, and Kakulu rice were collected form different secondary sources. Further, a survey was carried out in Thissamaharama to measure the farmers’ perception on high rice prices in the recent past. Forty five farmers were randomly selected to collect the primary data.Year-wise nominal market price (NMP) of all types of rice had increased continuously. However, the real market prices (RMP) of rice have decreased. The Compound Growth Model (CGR) was most appropriate 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 term of RMP. However, 44% of farmers were satisfied with the high rice price. According to the farmer view, price increment was a result of oligopolistic behaviour of middlemen and insufficient government involvement to control the price