ECONOMYNEXT – Sri Lanka’s President Gotabaya Rajapaksa has ordered price controls on farmgate prices of milk, following a visit to Milco, a state-run dairy firm.
President Gotabaya Rajapaksa has instructed Agriculture Minister Mahindanda Aluthgamage and State Minister of Livestock, Dairy and Eggs D B Herath ” to take immediate action to remove the price disparity in the purchase of liquid milk,” his office said.
“The President took this decision with the objective of empowering the dairy farmer and promoting the consumption of liquid milk,” the statement said.
The statement did not say whether President Rajapaksa ordered a price ceiling or price floor on farmgate milk.
As forex shortages worsened from money printed to keep interest rates down, powdered milk imports had been disrupted.
The farmgate milk price had moved up as firm competed aggressively to get whatever milk the milch cows produced, earlier reports said.
Feed prices have also moved up amid forex shortages and import controls. Sri Lanka’s inflation has generally soared to 14.1 percent in the 12-months the January 2022 after two years of money printing.
A state controlled price floor if set below the cost of production will discourage production and create shortages and hurt farmers. An excessively high floor, will reduce demand, hurt consumers, promote malnutrition but will create a glut.
A market driven price will allow production to respond to demand. Farmers in different areas may have different costs of production. Collection costs may also be different for companies. (Colombo/Feb25/2022)