June 28, 2010

 

Sri Lanka to import chicken on corn prices policy

 

 

A state agency will import chicken to Sri Lanka after government price controls created 'shortages' and production costs were pushed up by a policy to keep corn prices high.

 

Sri Lanka imposed price controls on chicken and also increased import duties on corn dealing a double blow to a poultry industry that suffered from a slump in demand during an economic downturn that started in late 2008.

 

Price controls created 'shortages' and though chicken parts, which are not under price control are available from time to time.

 

Large self-service retail chains routinely run out of chicken. The industry has warned that state price controls which prevented a timely pick up in prices to draw poultry farmers who went out of farming back to the industry. According to reports, a state agency will import 2,000 tonnes of poultry meat from Brazil.

 

Though official price control is at Rs350, a Black Market has developed around Rs500 a kilogram. Both Black Markets and price controls are an automatic consequence of state price controls.

 

Black Markets were not seen in Sri Lanka for common consumer goods since the controlled economy days of 1970s, but with state interference in farming increasing as Black Market was seen even in rice in the beginning of 2010.

 

Meanwhile, shortages of chicken caused by state price controls have also sent fish prices zooming up.

 

According to D D Wanasinghe, who heads a poultry farmer association, said that production was now coming back on stream. Importing chicken at this juncture will be disastrous as a glut is anticipated by early August with the industry stepping up production to meet the shortage, he noted.

 

Analysts said that permanently liberalising imports can be a good policy, if inputs are also freed from taxes, as it will eventually make the entire sector more competitive.

 

Unlike rice farmers, poultry farmers have little political clout, and have had to face discriminatory treatment from the state. Corn prices were pushed up through import duties to 'protect' farmers when a commodity boom collapsed in late 2008.

 

Many poultry farmers went out of business amid lower demand and breeder farms even destroyed parent stock. Price controls prevented a quick recovery in the industry.