Paddy, tea and coconut production drops, fuelling inflation concerns

Sri Lanka’s agricultural sector is facing a significant downturn, with key crops such as paddy, tea and coconut experiencing sharp declines in production. 

This comes as global agricultural commodities, including coffee and cocoa, also grapple with supply chain disruptions caused by extreme weather. 

The combined impact is driving up the prices in Sri Lanka, with food inflation becoming a growing concern for both consumers and policymakers.

In Sri Lanka, paddy production, the country’s staple crop, has seen a notable decline. By end-December 2024, the forecasted paddy output for the 2024/25 Maha season was 2.57 million metric tonnes, a 5.77 percent decrease from the previous season, according to the Central Bank data.

The drop in paddy production has exacerbated the rice price inflation. The retail outlets have reported rice shortages, with some varieties out of stock for weeks or even months. In response, the government has intervened with rice imports, minimum paddy prices and maximum rice prices, though with limited success in stabilising the market.

Meanwhile, Sri Lanka’s tea production, the country’s largest agricultural export, saw growth in both December 2024 (9.6 percent) and January 2025 (14.6 percent). However, the production sharply fell by 22 percent in February 2025, totalling 15.59 million kilogrammes. This decline brought the cumulative production for the first two months of 2025, down by 0.07 million kilogrammes. At the same time, the tea auction prices have also been on the decline.

Coconut production has also suffered significant setbacks, dropping by 33.1 percent in December 2024 and 32.2 percent in January 2025. This ongoing supply issue has driven the coconut prices up, with the households now paying nearly Rs.200 per nut.

On a more positive note, the local rubber production grew by 32.4 percent in December 2024, though the provisional data suggests a decline in January 2025.

Globally, both the coffee and cocoa prices have risen sharply in the recent months. According to the Food and Agricultural Organisation of the United Nations, the world coffee prices surged by 40 percent in 2024, reaching multi-year highs, due to the supply disruptions caused by the unfavourable weather conditions.

Similarly, the cocoa prices spiked by 30 percent in December 2024, hitting an all-time high of US $ 10 per kilogramme. The increase is primarily due to the poor weather conditions in West Africa, particularly in Côte d’Ivoire and Ghana, which together account for 60 percent of global cocoa production.