Saturday, January 31, 2009

The economic crisis and how it affects my enterprise

I am just trying to breathe after a staggering Rs21,000 cash flow only loss in this month January 2009. I must point out that this loss has not provided a salary for me or for that matter even lunch money, so I have to live on charity! I was hoping that my woes were over, but it seems that they are certainly not. I will show in detail all the items of my loss when I have analyzed all the components. It is something I don’t need to be ashamed off or proud of its just fact. As I am a UK qualified Chartered Accountant, I can have the auditable figures, out within a minute of the month ending, something not possible for any other enterprise on earth!! Or at least I like to think so. Show me I am wrong!

Of course if I include depreciation or amortization, the loss would be three times. I need a reserve of at least 75K a month just to be able to set aside funds to maintain the capital of the business at the current levels. So in reality my business is wasting away and not actually growing. That’s a horrifying thought as that was not my intention.

Apart from the normal problems I have encountered in production and the added problems this year of falling prices of King Coconuts, and Coconuts due to a glut in the market, I have to face a whole new problem partially caused by the economic crisis.

I have complained sometimes nauseatingly about the unreliability of my staff, who never turn up for work, with excessive absenteeism. Surprise! all decided to come to work this month with near perfect attendance and then claim the attendance bonus I used to offer. That was counterproductive as attendance fell, so I decided to abandon that incentive. I am now so grateful that it was removed as I realized that the perfect attendance was due to them not having any other source of income, with other providers of income being unable to give them the odd jobs they became used to. Those households are also suffering a cash flow problem themselves.

It sounds funny but it is no fun to me as it hurts my pocket more now, as there is no goal congruence between the workers and the employer. The workers want to maximize income, even if they don’t work, and I have to maximize profit. Actually if I cut 25,000 in wage payments, I could probably get into a break-even, meaning some are paid for no output! Making me sound like a big fool to employ the unemployable!

If you think I am just complaining, I have a worse report from a company I am advising: an Organic Farm, which employs 65 people. For the first time in 10 years under the current ownership, the farm has perfect attendance, and so all the workers draw the perfect attendance bonus of Rs2,000 each per month. This has resulted in the company having to pay out an additional 100K a month for wages. Tea their main product fell in output from 600kg in December to 200kg in January due to the drought conditions. So the loss ballooned due to lack of product and ballooning wage payments.

What both these examples show is that people take advantage of (I would go as far as to say exploit) the reliable employer in hard times and ignore and almost stick it to them in good times, by finding higher paid short term work and using their main job as insurance!

How about the results? yes for January 2009

Whole Enterprise A/cs Month January 2009 Loss of Rs21,204/-
Rental of Chicken Cage 20,000
Colombo Sales 65,700
Golf Club Sales 30,000
Godagama Shop Sales 113,227
Fresh Milk Sales 19,500

Cost of sales- Col 16,970
Cost of King coconuts 5,000
Plucking King coconuts 6,810
Diesel Cost of Cab 13,340
Maintenance of Cab 5,530
Wages re Col sales 11,200
Polonna- running cost 15,000 (72,650)

Shop- retail item costs 41,186
Shop- Polon Rice cost 18,900
Shop- Coconut costs 5,540
Bread 8,576
Coconut Oil 2,600
Eggs 2,700
Sugar 6,500
Banana 3,165
Shop Electricity 750
Shop girl payroll 9,000 (98,917)

Wages re cattle care 20,000
Milk costs-Bran/Poonac 3,860
Milk sales bike repairs 1,540
Tractor diesel cut grass 1,800
Medicine for cows 940
Vet 600
Artificial insemination 600 (29,340)

Farm, elect, gas, phone 8,919
Farm consumables 10,575
Wages farm excl above 21,000
Payroll tax penalty 20,000
Local Property Taxes 8,230 (68724)


Monday, January 26, 2009

A look back in history when Sri Lanka was known as the granary of the East

This blog is dedicated to understanding the present processes of agriculture in Sri Lanka, with a view to coming up with proposals to drastically improve on the miserably low productivity we are stuck in today. A brief look at history is also useful in making this case.

Amongst other activities I am a rice farmer in the Polonnaruwa district, and my paddy fields are fed with water from the Minneriya tank. This ancient tank also supplied water to paddy farmers a thousand years ago.

During the reign of King Parakrama Bahu the Great, when we were known as the granary of the east and when he sent a navy to conquer what is now known as Myanmar, people lived in a collection of villages, which were protected by forts and some by natural barriers of mountains and lakes. For obvious practical purposes the collection of homes were close to a water source.

The farmland that was fed by a sophisticated system of tanks and canals, was outside the village, and when dawn broke they went out to cultivate this land. Often the land was owned by the King and so it was a kind of tenanted land, where a rent in the form of money or service had to be paid. Substitute the word state for king, as that in effect was what the king provided in return. The security, and administration was carried out under his aegis.

This resulting arrangement meant that all farmland remained that way, and was not encroached on for home building or building one’s ranchettes, that many people in the Polonnaruwa now live in. The agricultural land was always kept that way and all effort was to use organic planting practices to maximize yield, as there were no pesticides and chemical fertilizers.

Admittedly, the number of people in this district were a fraction of today’s population, with a lot of land forested. The varieties of rice were indigenous, part of the over 500 varieties of rice prevailing in that age, so that regional grains were planted to suit the specific local conditions, which include weather pattern and soil conditions.

Instead of separating agricultural land from areas of habitation, recent practice in the last 80 years has been to give agricultural land to landless peasants from all over the country to live in, on the assumption that they as peasant farmers will have an increased income and quality of life. In practice what has then happened is that land has got divided amongst children and grandchildren. It is difficult to find any productive agricultural plots amongst the many homes and home gardens dotted all around. Very few of the owners of these ranchetts are farmers, and most of them are in service sectors such as retail, security, defense, healthcare, education, government and construction. Just on the street I live in given by DS Senanayaka for farming, there is not one full time farmer. I fear that the WHOLE COUNTRY is becoming one massive suburb with people living in ranchettes of up to three acres each and so agricultural land is disappearing.

Thursday, January 15, 2009

A day in my life in Minneriya, that is today, the 15th of January 2009.

The silent readers of my blog, who I am now discovering are many, will today, for the first time, enjoy my first upload directly on my mobile internet that I purchased on the 31st December 2008. I was only just able, going to the Dialog Tech at the Excel center on Darley Road, able to get the modem configured to the Apple Mac I use.

I am typing this at my desk in my verandah open on three sides, facing the river, with a neighbor from across river washing clothes, and bird sounds filling the air as well as all the other sounds of a forest canopy that covers the river.

The first thing after waking up to a call from a friend on her way to the airport to make her fortune in Africa, I had my cup of tea, and took 6 bags of paddy from my storage, which is the only lockable room next to the verandah I call my home. I took it for milling to rice with instructions as to how much polishing to do in keeping with my customers’ requirements.

I then returned and had my roti for breakfast, when Sudath the person who takes care of the place told me a van had come to the people I was to pluck the mango from. I told him to rush there to see if I was being by passed after having been promised first refusal. I was told that fortunately for me the fruit was still not mature enough for plucking the owners who I have known for a long time, will keep it for me. (one can’t trust anyone’s word here when some ‘monaras’ or thousand rupee notes are flashed in front)

On his way back he was informed that another neighbor with whom I have had some transactions was faced with an emergency. His son who is in the forces and was ready to return on leave today, and who I met last night bathing in the canal, had consumed a whole bottle of Gramoxone and rushed to the Polonnaruwa hospital. He was fine last night, and I heard through the grapevine, that it was some sort of tiff with a girlfriend that was the cause.

A few moments later when I was going through our work plan for the day, two neighbors came, asking me to purchase five and a half acres of free-hold paddy land in Giritale, about 3 km from here in a large paddy field for Rs1,500,000, and that they did not require anything other than allowing them to farm it on the basis of a rent of 20 bushels per acre per season for a limited period. At today’s paddy prices, it amounts to Rs 150,000 per year. I called a friend who had wanted some paddy land. He said he was no longer interested, except for property with river or forest frontage with a view. If I had the dough I would have purchased it for myself, but I would not want to borrow to buy. If I were to farm the land myself, already paddy farming on this land with a tractor that is under utilized, my net return would increase 3 fold from that of just renting the property using economies of scale.

After they left disappointed, I was then approached by another neighbor, in fact the lady a few doors from the earlier caller, (how the bush telegraph knows I am in residence!) wanting to borrow money urgently. She wanted 15,000. I just did not have the money to accommodate, even though the paddy promised in lieu of interest and the mortgaging of her title, just for 2 months would have yielded me an annualized interest of 160% for three months lending. See the blog entry below for the story.

I then had to go for an opening of a neighbor’s fruit and vegetable stall near my home, at the auspicious time of 11am. He is a farmer, from whom I occasionally by small quantities of produce, who like me feels he can get a better return on his investment if he is able to sell some of his produce retail. Fortunately he has a daughter and son-in –law able to run it for him, and is sort of a investment in their future he is trying to set up to keep them nearby.

I then went in search of a plucker for the coconut trees. I needed to take another lot of coconuts on my return to the farm in Godagama for sale in the shop. These guys are never available when you want them! We had plucked about 120 nuts from 8 trees and it costs Rs50 a tree these days, up from Rs30 a year ago. The selling price of nuts is now nearly half that of a year ago, due to the drop in world copra prices that have reduced demand. The nuts are instead flooding the consumption market and coconut oil market.

After a lunch of a salad of cucumber, tomato, onion and garlic with an olive oil dressing, I went to inspect the adjoining land that my sister purchased to look at the state of the paddy and arrange for some security there. I picked up the milled rice, and once unloaded, had my bath in the river in front.

Prior to nightfall, the margosa or kohomba leaves, are burnt in the verandah so the smoke will deter the mosquitoes that now are a nuisance and not infectious. Dinner, under kerosene lamp-light, was angel hair pasta, boiled carrot, beet and beans with ketchup, all of which is an unusual combination in these parts, but is what I was used to. Then blog and early bedtime at 8pm

Lets talk about the weather again

I referred many times in 2008 to the fact that the heavy rainfall of that year affected my business in most areas from production to sales. I am afraid the wise old farmers warned me that, a year of heavy rainfall is followed by one with much less rain, bordering on drought conditions. We have barely entered the first month in the year and this saying is proving to be correct, with all forecasts of a severe drought this year looking correct.

In my farm in Godagama I did not require any watering in 2008, that is not one day of water, while this year I have had to water the vegetable beds everyday. That is how the weather pattern has changed from one extreme to the other. It is farmers who notice this immediately. Urban dwellers only realize it when some form of water rationing is imposed.

Other affects of drought conditions mean that there is less grass for the cows, directly affecting milk production. A more costly exercise in cutting grass from any place one can find is the rule. There is lower yield from coconut and king coconut trees, which are large users of water.

I have taken advantage of the drought to clear some land from weeds and brush that grow quickly with rain, I have also had a better attendance from the workforce, as there is less work around. However as I am suffering a lower yield meeting payroll then becomes a squeeze. I can only imagine how the larger plantations must be affected, as I am reliably informed that tea production in some of the low country districts has suffered, and this is a double whammy as they have also been affected by the economic downturn that has resulted in lower prices as well.

The only option I have is to increase my irrigation expenditure to cope with this drought and improve my yield. A farmer has to face all circumstances and make the best of any situation. In that respect I always have and always will maintain that this is a vocation, with the most amount of risk, and the lowest overall reward of any form of business. It is only once the risk assessment is made that one can understand why rural agrarian populations all over the world are the most disadvantaged. Their lower level of education does not allow them to measure risk and insure against it, when underwriters are reluctant to cover weather risk as it relates to farm output and income. Farming in Sri Lanka should therefore not depend on the smallholder who remains in subsistence. He is least able to survive a flood or drought.

Urgency to save daughter from unsuitable boys makes for drastic action

I referred to above of a mother coming in search of urgent money. I can’t understand why she cannot borrow from her own children who she has given most of her possessions to and some who are well settled.

She has a daughter who is 17 who had an unsuitable boy friend and somehow managed to wean her out of that relationship, after she was hospitalized for an overdose of drugs arising out of the disagreement with her mother on her choice of mate at that tender age. In order to ensure she does not get involved with similar types, she scouted around and introduced a man in the neighboring village, who was in the army drawing a salary of Rs25,000 a month, and got her daughter to agree to marry him. The relationship outwardly appears to be a happy one.

In order that the Registrar of Marriages authorizes the marriage, the girl has got to be 18, and so for payment of a bribe, he would agree to falsify the date of birth of the girl. The girl is now 3 months pregnant, the boy stays with the girl when on leave from the army. I am only reporting all this as it came from the mother, so I am not vouching the accuracy of the mother’s story.

The soldier when married I believe gets marriage allowance over and above the single person’s allowance, and one should also point out that if the soldier dies in action, the wife will continue to receive his salary.

Both the person who introduced the man to the mother and the Registrar of Marriages who was persuaded to falsify have to be bribed in whatever name you call it. She needed the money urgently even though the soldier’s salary in a few weeks will cover all these costs, but she wants to pay it herself.

This mother has already lost a son years ago to the ongoing war in the North and she knows what it is like to lose a child, but the newly wed wife from that son, left the son’s home soon after his death and returned to her home village, where she still draws the husband’s salary.

The mother justifies by saving the daughter from getting into trouble, as any other man she got involved with will have to be given the girl so this way she chooses the husband. Additionally, the house the mother lives in is for the daughter, so the mother would rather live with a son-in-law she approves of rather than be turfed out of her own house by one who she disagrees with!

Tuesday, January 6, 2009

New Year’s resolutions

One of my blog readers asked me if I had a New Year resolution either personally or for my business. In my case personal and business is the same as it is the lifestyle I have chosen that intertwines both inextricably. That’s in a way easy to say but difficult to achieve. Actually since I returned to Sri Lanka at the end of November 2004, my resolution has broadly been unchanged and I am still on course albeit exceedingly behind schedule.

I want to build a small agro based enterprise, where I directly supply my own and neighbors’ products direct to consumers. Anyone interested can be my paying guest visiting and staying at my establishments, enjoying the fruits of my labor and the beauty of the surroundings in which I live. I would like wherever possible to be their personal guide to showcase these places that are not generally presented to traditional tourists, and where their presence does not interfere with traditional rural life except perhaps to enhance and regenerate skills that have disappeared, by marketing to a ready clientele.

They sound very noble objectives, which are very hard to achieve in a world that is changing even in rural areas beyond recognition. I have struggled hitherto with every obstacle placed before me as my blog can testify, but I remain steadfast in my resolution, that what I am doing is right and achievable. I am still hopeful that I will eventually be able to achieve a level of satisfaction, and with so many people both personally and through the blogs telling me that they wish they could be doing what I have embarked upon it gives me courage to pursue and overcome the inevitable obstacles.

More specifically for this year, I have hopes, that I would finally be able to finish the work on my forest lodge to house my guests. The ‘Kumbuk Pokuna Lodge’ and to build a proper bathroom at my Raja Ela property, Kumbuk Thuduwa, so I can accommodate visitors both for meals and overnights, so that they don’t have to stay in hotels as is done now. I would moreover wish for a reliable driver cum man Friday to take care of my weekly sales so I don’t have to be rushing driving myself in the dead of night on a Sunday to meet my delivery schedule to my home delivery customers in Colombo on Mondays.

If I were to dream, I would like to get a second covered delivery vehicle to more frequently deliver fresh produce to eager long suffering customers.

Saturday, January 3, 2009

My home delivery list in Colombo

Current home delivery price list with Oct’2007 prices in brackets

Rice from my paddy fields in Minneriya
Rosa samba kekulu per kg Rs75/- (50/-)
Rosa kekulu per kg Rs75/- (50/-)
Sudu samba kekulu per kg Rs 75/- (50/-)

Regular supplies in stock

Fresh milk from my cows per bot Rs 70/- (50/-)
White coconut oil- my nuts per bot 250/- (200/-)
King Coconut oil – qtr bottle 100/- (100/-)
Rotawewa Forest Bees Honey per bot 750/- (650/-)
Rotawewa Forest Bees Honey qtr bot 200/- (175/-)
King Coconuts each sold per bunch 18/- (15/-)
Coconuts each 30/- (27/-)

Fresh Leaves plucked in the morning
Prices per bunch
Gotukola 30/-(25/-)
Mukunuwenna 30/-(25/-)
Kathurumurunga 30/-(15/-)
Thampala 30/-(20/-)
Kankun 30/-(20/-)
Gus Nivithi 30/-(20/-)
Kalawampala 30/-(20/-)
Val penela 30/-(20/-)
Monarakudumbi 30/-(20/-)

From beneath the surface

Manioc per kg 50/-(40/-)
Hingurala per 500g40/-(40/-)
Kiri Ala per 500g 40/-(40/-)
Bathala per 500g 40/-(30/-)
Lanka Ala 500g 40/-(40/-)
Del / Polos ea 60/-(50/-)
Kehel Muwa ea 30/-(15/-)
Dambala 250g 25/-(15/-)

Vegetables(priced per 500g)

Tomato 75/-(60/-)
Aubergine 50/-(50/-)
Thalana Batu 50/-(40/-)
Karavila 50/-(40/-)
Watakolu 40/-(30/-)
Bandakka 40/-(50/-)
Makaral 40/-(50/-)
Alu Kehel 40/-(30/-)
Pathola 40/-(30/-)
Cucumber each 40/-(25/-)
Pumpkin qtr 40/-(30/-)

Green Chillies 40/-(20/-) per 100g
Capsicum 50/-(40/-) per 250g
Ginger 30/-(20/- per 100g
Garlic 30/- per 200g
Red onions 70/- per 500g
Big Onions 75/- per 1kg


Papaya ( yellow local variety) 60/-(60/-) kg
Ambul Kehel 60/-(60/-) kg
Seeni Kehel 60/-(60/-) kg
Ambun 12/-(12/-) ea
Kolikuttu 10/-(10/-) ea
Lime 40/-(40/-) 500g

I usually have the above all the time and those I don’t grow or collect from neighbors, I buy from the Meegoda Economic zone for my shop and accordingly make it available to my home delivery customers as well. Other items delivered in season include, murunga, thibbatu, kekiri, free range eggs, kola lunu, forest oranges, mango, pineapple and corn on the cob.

They are all very competitively priced and certainly less than Food City in most cases, so with home delivery thrown in it is me, and not the customer who is the loser in this venture and no wonder there is no else in the country doing this service, as it takes too much risk for too little reward.

Friday, January 2, 2009

Happy New Year 2009

To the readers of my blog, I hope I will be able to more frequently update as I have just invested in a Huawei mobile modem, which will most likely enable me to blog from the forests of Minneriya with no electricity direct to the web. The modem cost me Rs6000/- and my commitment with Dialog is at the rate of 1000/- a month for which I get 1GB. If I were to get unlimited data usage, the monthly charge is Rs 3000 +vat and I at present that is a little pricey. Those of you in the know will tell me that 1GB is not a lot, so I just intend to use it not to surf the net, but just to enable me to upload to the blogs from time to time.

I am really excited about this possibility as all this time I was stuck to only being able to upload once or twice a month when I got to some place that had internet access. Now I can sit with the elephants in a National Park and blog with photos almost in real time!! that really sounds awsome. Well it is isn't it?