Modelling a Marketing-based Solution for the Paddy Marketing Crisis in Sri Lanka: Case of the Upuldeniya Warehouse Storage Receipt System

The issue of paddy marketing characterizes the paddy sector crisis, as farmers cannot realize the expected price at the harvesting period due to the bulk of supply. This paper attempts to study the effectiveness of a new marketing-based model – Warehouse Storage Receipt System (WSRS) - to solve the paddy sector crisis in Sri Lanka. Primary data for the study were drawn from field surveys conducted among farmers and traders in the Huruluwewa Agriculture Colonization Scheme in the Anuradhapura district, and in-depth interviews were conducted among the officers in the Upuldeniya WSRS in the scheme. A descriptive-analytical technique was employed in the study due to the nature of the investigated problem. The results first indicated that a majority of paddy farmers sell their harvest during the harvesting period at the lowest price, leading to inadequate net income from paddy farming. Secondly, the study revealed the oligopolistic nature of paddy marketing structure, since a few large-scale traders handle a substantial share of the farmers’ production. The lower financial capability of the farmers to cover variable costs of paddy farming and pre-modern economic characteristics of the paddy marketing channel have allowed large-scale traders to grab the farmers’ production at a minimum price during the harvesting period. Thirdly, WSRS evaluation has revealed that the farmers could enhance the net income of paddy farming by adequately marketing their harvest via the WSRS, as it improves the harvest holding capability of farmers until they realize a Farmer Expected Price (FEP). The study modelled that the WSRS leads to improve market competition through supply management, and thereby gradually increases the price at the harvesting period and shortens the price movement period to create equilibrium, which has been the farmers’ expectation.