Analysis of Cinnamon, Pepper and Cardmom Value Chains in Sri Lanka
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Date
2023-07-11
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Abstract
Present government has identified the spice sector as one of the key sectors for achieving better export performance in future due to the high demand in the export market. To achieve the level of exports that the government anticipates by 2020, the sector needs to overcome key challenges that inhibit its performance. Thestudy maps three spice value chains in Sri Lanka– cinnamon, pepper and cardamom –to identify opportunities as well as constraints including quality and safety issues affecting the sector towards providing recommendations for policy interventions at different points in the chain. It adopts a value chain analysis as a framework of analysis and uses both qualitative and quantitative data to provide a situational analysis. It involved 31 Key Informant Interviews (KIIs), six (6) Focus Group Discussions (FGDs), which were supplemented with a purposive survey of farmers and observations to triangulate the findings.
The study reveals the following with regard to the three chains in the spice sector.
Cinnamon: The cinnamon value chain is fairly complicated with many agents involved at various stages of the process. Cinnamon cultivation is mostly done by smallholders wherein large scale producers and regional plantation companies are also involved in cultivation. Cinnamon peelers are the most important actors in the value chain who
are involved at the production level and they play a major role in making cinnamon bales. Village level and regional level wholesale collectors are some of the intermediaries who are involved in the collection stage of the chain;collectors are a crucial link between the producers and exporters. Processing of cinnamon is mainly done by exporters according to their foreign buyer requirements. Lack of skilled labour, high cost of labour and planting
materials and unstable prices in the market are some of the main issues faced by the producers. High cost of transportation, poor hygienic practices in storages, and high competition amongst collectors are some of the issues at collector level. At exporter level finding quality products, high cost of maintaining quality standards and market
concentration are the main drawbacks. To find solutions to these issues, there is a need to implement several strategies, requiring public private partnership at each levels of the value chain.
Pepper: The pepper chain is very fragmented and consists of many agents performing various functions; cultivation is undertaken by smallholders while there are a number of intermediaries in the chain; they include collectors/traders/wholesales, who buy the pepper, clean, grade and in turn sell either to processors/exporters, who then sell in either the local or international market. A number of challenges confront the stakeholders at
different points in the pepper chain. At the production level, cultivation/harvest has been affected due to low productivity, climatic changes, cost and availability of inputs including labour, pests/diseases, price fluctuations, theft and inadequate support /assistance for cultivation. In the intermediary stage in the chain, there is inadequacy of supply, lack of facilities for processing of pepper and related labour issues. At the point of exports, the export companies face shortages of supply, quality issues, inadequate facilities to undertake testing, amongst other issues. In the upstream portion of the chain, concern for quality and safety of the product is low compared to exporters, depending on the end‐markets. Addressing these constraints require multi‐pronged approach involving both the
private and public sectors including the value chain actors themselves.
Cardamom: The marketing structure of cardamom in Sri Lanka is characterized by its traditional nature at the domestic level and comparatively high degree of sophistication at exporter level. The traditional supply chain of cardamom in Sri Lanka is characterized by small holder cultivations, decentralized purchasing, low quality product purchases and sales and the presence of a number of intermediaries who extract a share of the benefits that should have been accrued to the producers. This has resulted in low value added in the chain, poor incentives for upgrading especially related to the quality and technology improvements and sluggish growth of the industry. There is not much concern on producing quality cardamom at the producer level. This can be primarily attributed to
poor crop management and post harvest practices, high labour cost, lack of quality awareness and difficulty in getting a premier price due to poor dealer network. Despite the greater scope of expansion created by the various opportunities and strengths in the sector, current production is mostly used for the domestic consumption due to
the structural and socio economic issues. Unavailability of suitable lands for cultivation and thrips problem are two most severe issues that the sector is facing at present. The sector requires an integrated approach involving both private and public sector to link the small holders with the processors and exporters in a shortest possible way to ensure not only quantity requirements, but also quality and price signals are moved both ways in the value chain. Research on productivity improvement, quality ensuring, cost minimizing and value adding promotion should be an integral part of such an approach.
Given that many of the spices from Sri Lanka including cinnamon, pepper and cardamom are currently destined for developing countries, attention on quality and safety considerations has been low. To diversify markets away from the traditional markets and ensure access to markets in developed countries and meet their expectations, there has
to be a lot more emphasis given to improving quality of products exported and processes along the value chains, which requires a collective effort. While the industry has undertaken initiatives towards this end especially in the case of cinnamon sector, much remains to be done to up lift the competitiveness of the industry including the poor
stand of products flowing in the chains.
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Keywords
Spices, Value Chain, Cinnamon, Pepper, Cardamom, Quality, Challenges, Benefits