Overview:
The agriculture sector contributes about 7 percent to the national GDP, out of which the fisheries sector contributes around 1.3 percent, and the livestock sector accounts for 0.9 percent. Over 30 percent of Sri Lankans are employed in the agricultural sector. Although Sri Lanka is a fertile tropical land with the potential for the cultivation and processing of a variety of crops, issues such as productivity and profitability hamper the growth of the sector.
Sri Lanka’s primary food crop is rice. Rice is cultivated during two seasons. Tea is cultivated in the central highlands and is a major source of foreign exchange. Fruit, vegetables, andoilseedcrops are also cultivated in the country. One of the current government’s top priorities is to increase productivity in the agriculture sector. Sri Lanka has been slow to adopt mechanized farming. The government wants to increase mechanization and grow higher value cash crops such as fruit, flowers, and other export-oriented crops. The lack of private investment in agriculture due to uncertain policies limits the expansion of the sector.
The importation of food and beverages accounted for 8.4 percent of total imports in 2021 with total agriculture, food, and beverage imports reaching $1.6 billion. Since the start of the COVID-19 pandemic, the Government of Sri Lanka has placed restrictions on many agricultural imports and the government expanded these restrictions and increased import tariffs in an attempt to preserve foreign currency reserves. Some government officials have publicly called for restrictions to be made permanent and to cover all food products.
On April 26, the Sri Lankan government announced an immediate ban on all chemical fertilizer and pesticide imports, which was later repealed in November 2021. Agricultural crop outputs were significantly impacted by the ban, especially tea and rice production, causing sharp price increases in the domestic market.
Leading Sub-Sectors
- Wheat Grain
- Lentils
- Animal feed
- Dairy Products
- Meat
- Cotton, Yarn, and Fabric
Opportunities
Wheat Grain: Sri Lanka imported approximately $138 million in wheat in 2021. All imports were commercial transactions and mostly of Canadian and Australian origin. U.S. wheat and meslin exports to Sri Lanka were estimated at $16 million in 2021. Prima Ceylon Ltd, a Singapore-based wheat miller, is the largest producer of wheat flour in the country. The flour produced by Prima is for domestic consumption, as well as for exports. The company operates one of the largest flour mills in the world in the eastern town of Trincomalee. A second mill, owned by a company from the UAE, operates in Colombo. The main competitors in the wheat-supply business are Canada, India, and Australia.
Lentils: Sri Lanka is one of the major importers of red lentils with annual imports estimated at approximately $80 million in 2021. India is a main exporter of lentils to Sri Lanka. U.S. suppliers have significant opportunities in this market if a competitive pricing structure can be developed with a view to long-term selling in the market. Many local buyers have expressed an interest in working with U.S. suppliers due to the superior quality of U.S. lentils.
Animal feed: Sri Lanka spends approximately $96 million annually to import animal feed in 2021. Soy and corn are the main ingredients used in the animal feed industry, which formulated around 230,000 metric tons of animal feed annually in 2021. GMO restrictions are not applicable for animal feed.
The United States exported approximately $50 million of animal feed to Sri Lanka in 2021.
Currently, roughly 150,000 metric tons of corn are imported to the country annually to supplement the local production. The United States did not export corn (maize) to Sri Lanka in 2021.
Dairy Products: Sri Lanka is a net importer of dairy products. The country imported $139 million of milk and milk products in 2021. The United States exported $2.6 million in dairy produce to Sri Lanka in 2021.
Meat: The total U.S. meat and edible meat offal exports to Sri Lanka were $2.5 million in 2021, compared to $1.6 million in 2020. There is a market for U.S. turkey, duck, and other meat types for the food service industry, however the government has restricted imports of these products in the current economic downturn.
Cotton, Yarn, and Fabric: Sri Lanka imported approximately $250 million of cotton (raw cotton, yarn, and fabric) in 2021. Imports of cotton, yarn and fabric from the United States were about $250,000 in 2021. U.S. cotton suppliers have substantial opportunities to supply to Sri Lanka’s export-orientated apparel sector. India, Indonesia, and South Korea are the current major cotton suppliers to Sri Lanka.
