Sustainability of small-holder sugarcane-based production systems in Sri Lanka
This study analyses important technical, managerial and economic factors in relation to the long-run sustainability of the small-holder sugarcane-based production systems at the three main sugar mill areas in Sri Lanka. The sustainability is an issue in view of the low overall productivity and profitability of the Sri Lankan sugar industry, the absence of grower-miller and grower-grower equity, and environmental concerns over sugarcane cultivation and processing. The degree of sustainability was measured by a composite index involving the economic welfare of farm households, the viability of the sugar companies, grower-miller equity, and the fertility status of sugarcane-growing soils. The analysis was carried out by means of a dynamic and stochastic simulation model of small-holder sugarcane production, and sugar and molasses processing. The model consists of production and processing sub-models, together with subsidiary sub-models for cane and ex-factory sugar pricing, rice production and off-farm activities. It uses primary data from a farmer survey, and secondary data from sugar companies, sugarcane experiments and other sources. The results indicate that productivity of sugarcane farming and sugar processing is mainly affected by technical/management factors, and profitability by both technical/management and economic factors. The existing cane payment systems are not equitable in dividing the proceeds of sugar and by-product processing. An alternative formula, which takes into account the commercial value of cane, and divides sugar proceeds in proportion to cost shares and by-product proceeds on an agreed proportion, ensures greater grower-miller equity. In most situations, sugarcane cultivation does not degrade N fertility of soils, but it depletes P and K. Overall, the level of sustainability is low for both settler and out-grower systems under the existing conditions at Hingurana and average for Pelwatte and the irrigated system at Sevanagala. For the rain-fed system at Sevanagala, it is above average.