Spice sector’s current crisis and the way forward

Director General of Department of Export Agriculture, Dr. A.P. Heenkende delivered the keynote speech at 35th Annual General Meeting of the Spice and Allied Products Producers and Trades Association held in Colombo recently. 

Dr. Heenkende spoke on the current crisis in Sri Lanka’s spice sector and the way forward for the spice sector. Following is the full speech. 

I have a great pleasure having been invited as the chief guest of this memorable evening of 35th Annual General Meeting of the Association.

In Sri Lanka, although the challenges exist, the spice and allied products make a major contribution to the national export sector. 

In 2018, the total volume of EAC has achieved 48,331 Mt compared to 59,000 MT in 2017. Export value is Rs.64, 000 million compared to Rs.71, 000 million in 2017. The export decline was mainly due to clove export decline (5,800 Mt in 2017 to 1,480 Mt in 2018) and areca nut (10,000 Mt in 2017 to 4,947 Mt in 2018). 

As it was in the last two years, black pepper received high public attention in 2018 creating a significant political tension within the country. Sri Lankan pepper prices showed slow, but steady decline throughout 2018. However, even in this background Sri Lanka has exported 13,118 Mt of pepper and earned Rs. 12,000 million
Export volume and earnings of pepper oil were 66.51 Mt and Rs. 308.98 million respectively, which showed 35.8 percent increase of export volume and 36.2 percent decrease of export earnings.

Cinnamon exports show a continuous growth starting from 2016 by breaking the stagnation of export volume over decades. Export volume of cinnamon has reached 17,536 Mt showing a 5.5 percent increase over the previous year. It was the highest export recorded in the recent history.  

Export earnings have also increased by 12.9 percent over the previous year from Rs. 30,872 million in 2017 to Rs. 34,852 million in 2018. It was observed that Cinnamon exportation earnings constituted around 54 percent of the total export earnings of EAC in 2018. Export volume and earnings of vanilla oil, lemon grass oil have increased drastically. 

Main buyer 
As usual, Mexico had purchased around 55 percent of total Cinnamon export and many Latin American Countries had purchased large bulks. Purchase of cinnamon by USA had declined from 1,995 Mt in 2017 to 1827.5 Mt in 2018. 

India was the main buyer of Sri Lanka pepper, clove, nutmeg and mace accounting for 84 percent of pepper exports, 64 percent of clove exports, 57 percent of Nutmeg exports and 74 percent of Mace export respectively. Similarly around 99 percent of areca nut export in 2018 had also reached India. 

India had imported 1,496 Mt of cocoa from Sri Lanka and it was around 67 percent of total cocoa exports in 2018. Pakistan, the main importer of Sri Lankan betel had shown a declined export share from 5,030 Mt in 2017 to 3,858 Mt in 2018. 

USA was the main buyer of Cinnamon leaf and bark oils, Citronella oil, Ginger oil and Lemon grass oil in 2018. France, Canada, India, Spain and Germany had appeared as the main buyers of cardamom oil, Clove oil, Nutmeg oil, Pepper oil and Vanilla oil in 2018.

Average annual farm gate price of coffee, clove, cinnamon quills, mace, cardamom and betel had increased in 2018 while the same of cocoa, pepper, nutmeg, citronella. 

Ginger and citronella had decreased. Among EAC most outstanding price increase in 2018 were shown by betel. Average annual farm gate price per 1000 betel leaves had increased from Rs. 1,855.26 in 2017 to Rs. 3,728.65 in 2018. Average annual farm gate price of cinnamon had increased from Rs. 1,846.13 per Kg in 2017 to Rs. 2,018.70 per Kg in 2018 while the same of cardamom had increased from Rs. 2,502.47 per Kg in 2017 to Rs. 2,778.36 per Kg in 2018. Decline of pepper price was a noticeable feature even in 2018 as it was the previous years. Pepper prices had started to decline since the end of 2016 but a sharp and steady decline was noted after May. The average pepper price in 2018 was Rs. 586 per Kg which was Rs. 831 in 2017.

International prices
According to the ‘Public Ledger’, international prices of most of the EAC commodities except cocoa, mace, cardamom and citronella had declined in the year 2018 over the prices of 2017. 
Anyhow, we have to rethink on how to find solutions for major crisis in spice sector. Private sector plays a major role in the spice value chain. We have to take examples from the world for long term solutions. 

I will explain the model used in Vietnam.

We can adopt these models to the establishment of the major value addition factories. 

The government has taken policy decisions regarding the complete ban of imports of cinnamon, black pepper, nutmeg, turmeric and areca nut. 

At the same time a custom ordinance has also been imposed to completely ban the above imports. The Department of Export Agriculture also has taken the following major steps to overcome these problems. 

Improvement of product quality to attract European countries, Japan, Australia. 80 percent of pepper is going to India and 55 percent of cinnamon is going to Mexico.
Diversity of export market 
Issues in GI, GAP, GMP certification
Improvement of post-harvest technology
Motivating farmers for the production of quality pepper (BD = 530 , 550 , 580  g / ltr – Badulla, M.C . 12- 13 percent, E.M. 0.5 – 1 percent )
Mature pepper harvesting
Mini lab programmes
GAP, GMP in 2020 January
Green village, organic village program
Market destination diversification 
Value addition (white pepper, oil etc.)
Stopping illegal imports (At the moment the government has taken necessary steps)
License system -  genuine people can import
Limited strong actions
All the stakeholders should act as a team to overcome the challenges.