F t A I U K L O A STUDY OF THE ECONOMIC (MANIOC) AS AN INDUSTRIAL RAW P.A.Samaratunga POTENTIAL OF USING CASSAVA MATERIAL IN SRI LANKA ' In Sri Lanka, there is much Indus­ trial potential in cassava or maniok, through the most currently relevant pro­ ducts are starch, tapioca pearls and animal feed. The economic potential of this widely grown tuber is discussed ih this paper by P.A.Samaratunga, Agricultural Economist at the Central Agricultural Research Institute. Gannoruwa. INTRODUCTION Root and tuber crop production at present is an integral part of Sri Lan­ kan agriculture. Based on the potential uses, these crops (excluding potatoes) could be divided into two groups. The first comprises sweet potatoes ahd all other, yams. They do not possess any significant value- other than as a direct human food. Only cassava belongs to the second category which can be either directly consumed or used as an. input for agro-based industries (Nwe- ke, 1980). . Although there is evidence that sig­ nificant quantities of cassava have been used in industries, especially be­ fore 1978, the food balance sheets (Department of Census and Statistics, 1960-1984), indicated no utilization of cassava, or any other root crop, in any industry during the. last two deca­ des. No external trade of any of these crops were recorded either. Hence the total production less the post harvest losses constituted the total availability which was assumed to have been di­ rectly consumed as human food. Ap­ parently, though substantial in abso­ lute quantity, with respect to the total production.only a small fraction wat channelled into industries and hence a /air approximation of such.quantities had not.'been possible in the estima-' tion process. No other, reliable source . of data on this aspect could be traced, despite the evidence that cassava is still being used in some small scale in­ dustries (Jay awardena, 1984). In Sri Lanka, the industrial poten­ tial of cassava is thoroughly under- exploited. ° Cassava has been identified as a potential base for manufacturing industrial starch, - glucose., adhesives - and paints. Also, dried chips and pel- . lets of cassava for animal feed and ta­ pioca: pearls (as a substitute for sago) for confectionery are two other promi­ sing potential uses (Jayawardena, 1984). Small scale plants were produ­ cing these commodities at commercial •level before they were adversely affec­ ted by higher quality substitutes im­ ported after 1977. The textile industry which was the major purphaser of starch, presently relies for .its require­ ments mainly on imports: Inability of the local producers to maintain the quality and the price of cassava starch at levels competitive with the impor­ ted starch appears to be. a major cause of this situation. Animal feed produ­ cers tod have given up the use of cas­ sava chips in the face of a similar com­ petition from less expensive maize. In this context, this study attempts to evaluate the economic constraints to the use of cassava as an industrial raw material and the ways and means of alleviating them. This analysis con- T A B L E 1 centrates only on the starch and ani­ mal feed industries because in Sri Lan­ ka, they have been the most wide­ spread methods of cassava utilization, outside direct human consumption. METHODOLOGY • The analysis was conducted mainly with the use of cross sectional secon­ dary data. Time series data were also used to.a limited extent to supplement the analysis, while primary data were also gathered from local topioca starch and pearl producers on the cost and re­ turns of their industries. Tabular com­ parison was the analytical tool em­ ployed throughout the study. RESULTS AND DISCUSSION Cassava requirements for industrial use With the conservative estimate of IS perce'nt dried chips of cassava in animal feed and a conversion ratio of 3:1 from fresh roots to dried chips, present production of approximately 90,000 metric tons of feed per year (Jayawardena, 1984) would need Estimated requirements of Cassava and Land for achievable industrial utilization in Sri Lanka Method of utilization Net Additonal requirement of fresh cassava roots * (met. tons) Cross additional requirement of fresh cassava roots • * (met.tons) Additional land required • * * (ha) Animal feed 40500 50625 5062.5 Starch for textile industry 7700 9625 962.5 Import Substitutions Maize and corn flour 2232 2790 279,0 Other'careal flour 403 '504 50.4 Starch/I nulin 1469 . 1836 T8.4 Sago 136 170 17.0 Tapicoa'and Sago- • 4306 5383 538.3 m Total requirement. 56746 70933 7093.3 * Refer text for details ** Taking into account 20 percent of post harvest losses too. *** Assuming on average yield of 10 metric tons/ha. 28 ECONOMIC R E V I r W . MARCH 1987 40,500, metric tons of fresh cassava roots per annum (Table 1). Jayawar- dena (1984) also reported that the currcnt^requircment of starch for the textile industry is 2 million kg. per year and about 55 percent of this can be replaced with cassava starch. This leads to a requirement of 1,100 metric tons of cassava starch which is equiva­ lent to, (under the local small scale ex : traction conditions). 7,700 metric tons of fresh roots (Table 1). .Hence, the current net requirement of fresh roots is 48,200 metric tons per year. With 20 percent post harvest losses, and at an-average yield of 10 metric tons per hectare, the additional annual production and area requirements are estimated at 70,933 metric tons and 7,093.3 Ha, respectively. Over the TABLE 2 Annual Production and Extent o f Cassava i n S r i Lanka 1975 - 1984 Production Area Y i e l d • (000 met . tons) (000 Ha) (kg/Ha) 1975 996.87 164 .842 6047.43 1976 747.60 110.759 6749.79 1977 556.65 95.801 5810.48 1978 585.84 74.355 7878.96 1979 534.54 53.591 9974.44 i960 499.49 51.048 9784.71 1981 526.01 56.116 9373.62 1982 572.85 - ,59.179 9679.95 1983 722.11 55.373 13040.83 1984 682.48 56.773 12021.21 Sourc«: Department of Census and S t a t i s t i c s TABLE 3 Importa of Cassava products end:~sone other related products to Sri Lanka average annual production for the last 5 years, that is 600,588 metric tons, (Table 2) this is only a 8.0 percent in­ crease. Thus; it is evident that the impact of operating the above two industries, even at full strength, would be margi­ nal over the present total cassava pro­ duction and utilization. Moreover, even if the imports of various related commodities in Table 3 were fully substituted with cassava starch it will add only around 10,000 metric tons of fresh cassava, which again is a comparatively very small quantity? 1. It was assumed that the subsitution would be carried out on one to one basis since no coefficients of substi- tion were available. 2. As the imported starch is used mainly in the textile industry this computation involves a double counting with the earlier estimate of 7,700 metric tons. If the quantities were netted out, the actual addi­ tional requirement of cassava be­ comes even smaller. That does not contradict the discussion in the text. Market forces and prices The findings of the above section have important implications connected to the inter-relationships among pro­ duction, human consumption and in­ dustrial utilization of cassava. Direct human consumption has been main­ tained at a level of at least over 90 per­ cent a share of the cassava annually ITEM 1980. 1981 1982 1983 ITEM Quantity '000 Kg Value '000 Rs. Quantity '000 kg Value Quantity '000 Rs'. '000 Kg Value Quantity '000 Rs. '000 Kg Value '000 Rs Mai to and. corn Hour 318.51 1887:90 282.73 1963.82 355.50 ,2593.93 N.A H.A' Other cereal flour 2.33 64.23 75.15 1398.22 95.35 991.15. 52.98 849.32 Sterch/Inulin 300.10 1861.75 126.52 1008.72 203.12 1957>ii;':i*'vl3 174*147 Sago 15.00 86.22 32.23 38.60 669.41' T29.22 889.$2 TapiocA and sago 690.13 3452.51 540.35 2990.36 a a a a l f I t was assumed t h a t - t h e s u b s t i t u t i o n would b e c a r r i e d o u t on one t o one b a s i s s i n c e no c o e f f i c i e n t s o f s u b s t i t u t i o n were a v a i l a b l e . 2 . As t h e i m p o r t e d s t a r c h . ' i s used m a i n l y i n t h e t e x t i l e i n d ­ u s t r y t h i s c o m p u t a t i o n i n v o l v e s a d o u b l e c o u n t i n g w i t h ' t h e e a r l i e r e s t i m a t e of 7,700 m e t r i c t o n s . I f t h e q u a n t i t i e s were n e t t e d o u t , t h e a c t u a l a d d i ­ t i o n a l r e q u i r e m e n t of c a s s a v a becomes even s m a l l e r . T h a t does n o t c o n t r a d i c t t h e d i s ­ c u s s i o n i n t h e t e x t . a. Delia were inconsistent. Source: External Trade Statistics, 1980 thro 1983 Sri Lanko customs. ECONOMIC REVIEW, MARCH 1987 29 1 utilized. Consequently, the .food commodity market is the price deter- minent for cassava. The other induss tries are price takers which adjust their derived demand for fresh cassava as well as the supply of their products, accordingly. If such industries are to survive, they should pay a price high enough to distract the farmers from the well established food commodity market. On the other hand jn marketing the product, the starch'industry has to compete ,with imported starch, particularly the Indian product sup­ plied at low prices. Average CIF prices of imported' tapioca and starch/inulin fof^the" period 1980— 1983 • were Rs.5.27 and Rs. 9.24 per kg., respec­ tively (Table 4). The prices have in­ creased recently and the current retail price of imported tapioca pearls is Rs. 13.00 per kg. The wholesale price offered to local tapioca pearl produ­ cers is Rs. 13.00 per kg. This shows that the prices received by the local producers are closely related to the im­ ported prices, for tapioca. As a matter of fact, the prices of the local products are generally determined by the prices of the imported product as they are prefered due to their higher quality. Currently, cassava fetches an attrac­ tive farm price of around. Rs. 1.86 per kg. At this price, a hypothetical situa­ tion of zero processing cost provided the minimum concieveble prices the chip and tapioca pearl producers should receive for their products. Such minimum prices for chips and starch were Rs. 6.70 and Rs. 15.62 per kg (Table 5). But maize, a superior star­ chy ingredient in animal feed is being supplied in adequate quantities at the current price of Rs.3.00 per kg. There­ fore cassava chips cannot succeed in the competition as an input to the animal feed industry. On the other hand, the conceievable minimum price of tapioca pearls is Rs. 15.62 per kg (Table 5) and higher than the whole­ salers' offer of Rs. 13.00 per kg. Never­ theless in reality there exists a substan­ tial cost of processing with the cost of production of starch rises well above Rs. 13.00 upto Rs.20.18 per Kg. (Table 5). The cassava based industries are 1 thus affected adversely by the price leadership of the food commodity, market at the inputs end and the com­ petition from cheap imported substi­ tutes at the output end. Consequently the prospects for promoting'the pro­ duction of cassava dried: chips and starch are setting. The expansion of the demand for animal feed through encouraging live­ stock, especially cattle and swine, pro­ ducers to use more concentrates is one promissing avenue of promising the utilization of cassava. Introduction of low cost and high return industrial uses for root crops through research is another obvious improvement. Never­ theless, both these involve intensive re­ search and extenstion efforts and therefore would be possible only in the long run. Also, for them to be ef­ fective,- encouraging price and trade, conditions are essential. Thus the only solution valid in the short run, and in the long run as well, is changing the existing disadvantageous terms of trade. At the first sight, it looks as if the cur­ rent adverse situation, is not likely;td change unless the free trade policy and the incentives for completing crops7 are changed. Nevertheless, if trade restric­ tions are imposed in order to protect local industries, it will result in an in­ crease in the price of root and tubers which in turn reduce the calorie con­ sumption in the low income classes. On the other hand, removal of the price supports for the other crops will lead to a general decline in agricultural prices and hence, farm income. Ans­ wers to these questions can be found only in the supply side of the picture. . Production and the supply of Cassava It was pointed out before that roots and tubers have been mainly a cheap source . of calories in low income classes, with limited alternative uses.; Therefore the elasticity of demand can be close to zero. But the supply, of the same could be assumed more elastic though expirical evidences are ex­ tremely rare. The only estimate avajlfc ble showed that both short and long run elasticities were equal to 1.09 for cassava in Thailand (Askari and. Cum- TABLE 4 CIF Prices of some Imported;:, cassava products and close substi tutes, 1980 to 1983 CIF Prices Rs/Kg 1980 1981 1982 1983 Maize and Corn f lour 5.93 6.95 7.30 N.A Other cereal f lour 27.57 18.61 10.39 16.03 S tarch / inu l in . 6.20 7.97 6.64 16.14 Sago 5.75 6.45 17,34 6.88 L'apica and sago 5.00. 5.53 a a a . Data were inconsistant Source: External Trade S t a t i s t i c s , 1980 thro 1983 S r i Lanka customs. 30 ECONOMIC RE ' .:W, MARCH 1 987. TArXE 5 Costs r e l a t e d t o Cassava ch ips and tapioca pearl production were outstandingly high. If cassava was grown at recommended .input le­ vels, they could produce returns to working capital as well as to land and labour, higher than those of the other crops (Table 6 and 7). Industry I n p u t ' Quan At Zero At a c t u a l t i t y per p r o c e s s i p g . process ing Kg of the c o s t (Rs) c o s t ( R s . ) product Cassava ch ips Fresh 3 Kg Cassava r o o t s Materials Labour P r o f i t Tota l n . a . n .a . 20% 5 .58 0 . 0 0 0 .00 1.12 6 .70 5 .58 n.a- n.a; ri.arV Cassava Starch Fresh r o o t s 7 Kg 13.02 13.02 Labour 0 .22 a.days 0 . 0 3 . 3 0 Mater ia l s - 0 . 0 0 . 5 0 P r o f i t 20% 2..GO 3 . 3 6 Total 15.62 10.18 mings, 1977). The comparatively high supply elasticity, particularly in the short run, is attributed to the non- seasonalily of the planting and harves­ ting of cassava and its commercial orientation in Thailand. However, in Sri Lanka cassava is mainly grown as a subsistence crop with very low lovels of inputs and hence at an extremely low cost (Table 6) which .implies that the total production of cassava should be inelastic in Sri Lanka. Low costs of production along with very high returns to land and labour imply thai cassava production is done in a non-ihtensive manner (Table 6) . Also, under, the widespread present .practice, no liquid capital is required to produce these crops. In Table 7 costs and returns related to the pro­ duction of cassava is compared witby some alternative crops. This reveals that the net returns per hectare of cassava exceeded those ,of cowpea, green gram and maiz.e and reached the levels pertaining to chillies, which is a main cash crop. .On the other hand, the costs of production of cassava was much lower than the costs incurred on the other crops (Table 7). It is impor­ tant to note, that even this low cost is only the imputed cost of family labour but not an actual monetary cost. A s a result return to capital became inappli­ cable to the root crops while the re­ turns they yielded to land and labour Despite this potential and the rising price (Table 8) adoption of cassava cultivation is limited in Sri Lanka. This situation 'is the combined effect, of several.factors. In the first place, Table X show;;,that the prices of many agri­ cultural products increased during the past sevefal years. Hence, eventhough there hap been an increase in the monetary price of cassava, its relative prices at the farm level has not chan­ ged signit'ieantlyr Secondly, most of the roots and tuber crpps arc cultivated in small plots with family labour as the only variable input. Unavailability of capital would he an extremely limiting factor to these small scale operators, if they attempt to expand their production. Moreover, the scale of production could not be increased remaining in the same production process. After a point it would need hired .labour and become competitive rather than sup­ plementary to the other activities in the farm business. Cassava would not be as much profitable as the levels found in Tables 6 and 7. ' / Thirdly, root* and tubers are grown as subsistence crops and us was ex­ plained earlier, are only slightly res­ ponsive to price. II is also important to note that the strength of the root and tuber crops in peasent agriculture stems out of their adptabilily as a low cost- low risk crop but no I us a cash crop (Nestel, 1972: Jayawardena, 1984).Therefore. il seems that the ma­ jority of the farmers view cassava as an insurance, looking after the subsistence requirements in case of emergencies, but tiol as a commercial crop. Consequently, in determining the level of production of cassava, the role of supply shifters like technological improvements and on-l'arm consump­ tion shifters such as changes in grain ECONOMIC REVIEW, MARCH 1987 prices and availability, growth of family income, are more important than the own prices. To counter the price increases resulting from demand expansion,, these supply shifters, pri­ marily the technological improve­ ments, will have to be employed, to expand the supply as well. Here again substantial amounts of research and ex­ tension efforts are required at the cost of public funds and hence they should be considered as a part of the national agricultural policy. Moreover invest­ ment on such programmes yield higher returns to the resources utilized and better income to the farmers without a price increase that reduces consumer welfare. SUMMARY AND CONCLUSION In Sri Lanka, numerous industrial potentials are open only to. cassava such as producing industrial starch, ta­ pioca pearls, adhesives and animal feed' However, only starch, tapioca pearls and animal feed are the pro­ ducts currently relevant. It is interesting to note'that the production of cassava has to be in­ creased by a mere 8 percent even if the country's entire requirement of these commodities are to be produced local­ ly. Therefore the presence or the ab­ sence of industrial outlets is not likely to create a marked difference in the production of cassava, which is prima­ rily a subsistence crop. Nevertheless the price and the market supply of the same would rise as a result of the ex­ pansion of demand. Meanwhile, more than 90 percent of the total cassava production has been consumed as hu­ man food, in the past. 'Consequently, the food commodity market has been the price setter and the industries, which utilized only relatively small quantities, have been the followers. The local cassava based industries had to operate with this given price at the input end and the prices of the compe- - ting imported products at the output end. With such prices and the available technology, the local industries have failed to operate within profitable levels and hence been driven out of business to a large degree. Own price elasticity of the demand for cassava is expected to be less than unity, on a priori grounds. As a result the scope of controlling the total quantity demanded by means of price intervention is restricted. The supply of roots and rubers is: inelastic too, due to the low input - low risk produc­ tion process presently practiced by the farmers who are basically subsis­ tence oriented. Even though the total supply and total demand are both price inelastic, the market demand and the market supply are relatively more elastic. Hence, the role of own prices, though limited on deciding the pro­ duction and consumption, is substan­ tial in deterrruning the quantities tra­ ded. Therefore, imposition of trade restrictions on imports so that a higher price could be offered for local cassava produces would transfer a part of human consumption to industrial use. The short and medium run effects of expanding the demand of industries viz., increasing the uses of concentra­ ted livestock feed and the introduction of new industrial potentials, would be the same,' which eventually results in a further decline of the calorie con­ sumption in low income classes. Ob­ viously the solution to this problem is technological improvements leading to higher productivity and effective dissemination of the same among the farmers, which are only long run possibilities. ACKNOWLEDGEMENTS The author wishes to gratefully acknow­ ledge the help and encouragement extended by Dr. S.D.G.Jayawardene and Mr. K.P.U.- De Silva (Botanist and Research Officer at the Central Agricultural Research Institute, Gannoruwa, Peradeniya, Sri Lanka) in the process of conducting this study. TABLE 6 Costs and re tu rns r e l a t i n g to cassava cu l t iva t ion a t farmers' and recommend'-, management p rac t ices (per Ha.) Item Farm Recommended Amount Cost (Rs.) Amount Cost (Rs.) Land Preparat ion 43.9 (m.days; Plant ing 2.5 (" ) F e r t i l i z e r appl ica t ion - Earthing up Weeding Harvesting 8.9 (") 1Total cost (Rs/ha) Yield (Kg/Ha) Farm Pr ice (Rs/kg) Gross Return ( R s / H a ) Net Return (Rs/Ha) Return per man day (Rs.) Return per Rupee of working c a p i t a l (Rs.) 1097.50 (by t r a c t o r s ) . 1117.50 62.50 10.0 250.00 0.00 269 kg 733.68 0.00 10.0 (m.days)250.00 0.00 20.0 (") 500.00 222.50 20.0 (") 500.00 c 1680.00 3351.18 7604 . 0 0 20000.00 1.50 1.50 11406.00 30000.00 9726.00 26648.82 169.73 469.15 d 15.40 a . Source: Department of Agr icul ture , Division of Agricul tural Economics (1980^ b . Source: Department of Agr icul ture , Botany Division (1984) c . Only the imputed value of family labour d. Not appl icable as no c a p i t a l cost was incurred. The only- input was family labour. 32 ECONOMIC REVIEW, MARCH 1987 TABLE 7 P r o f i t a b i l i t y comparison between root and tuber crops and some se lec ted subsidiary food crops in major .Cassava growing a r e a s . Crop 8 Cost of Net re turn Cul t iva t ion (Rs/ha) (Rs/ha) . Retrun to Return to, working. Labour c a p i t a l (Rs/feupee.' o f ( Rs/m.day) ca 'pi ta l ) REFERENCES Askarl Hossein and John Thomas Cum- mings.(1977). Estimating agriculture sup­ ply response with the Nervolve model; A survey. International Economic Review Vol. 18 No. 2 Central Bank of Ceylon, 1979 to 1982. Price and Wage Statistics, Colombo. Cassava Cowpea1^ Green gram' Maize 1) C h i l l i e s 1) 1680.00 3439.86 4129.67 2830.47 7995.96 9726.00 846.05 182.34 16.04 12292.42 169.73 27.49 29.64 22.84 74.27 b 1.87 1.06 0.71 15.03 a . Under rainfed condi t ions . b . Not appl icable Source: Adopted from Department of Agr icul ture , Division of Ag. Economics (1983). TABLE 8 Annual a l l i s land averages of producers ' P r ices of Cassava and some selected competing crops Crop • Pr ices 1979 1980 1981 1982 1983 1984 Department of Agriculture. (1980) Cost of cultivation of agricultural crops - Maha 1978/79. Peradeniya, Department of Agri­ culture, Division of Agricultural Econo­ mics, Farm Management and Statistics. (1983). Cost of culti­ vation of agricultural crops,- Yala 1983. Peradeniya, Department of Agricultural Economics Projects. Department of Census and Statistics.11960 thro' 1984) Food balance sheets (Memeo): Colombo. Jayawardena, S.D.G.I1984). The produc­ tion and utilization of cassava in the con­ text of the agricultural economy: Projec­ tions and problems in the further develop­ ment of cassava in Sri Lanka. Paper pre­ sented at the "Workshop oil the Future po­ tential of cassava in Asia and the research development needs". Bangkok, Thailand. June, 1984. Cassava (Rs/lh) 0.35 Paddy (Rs/Bu) 41.83 Green Gram (") 3.23 Cowpea - MI 35\ (" ) 2.18 Kurakkan (") / ' 35.21 Maize ' ( " ) • • • . 34.41 Dried C h i l l i e s (Rs/ ' lb ) 9.10 0.56 0.63 51.92 68.75 4.15 2.96 4.19 2.91 57.73 78.98 45.91 62.01 10.66 9.35 , 0.64 0.84 72.65 73.90 4.02 230.79 3.80 187.07' 69.93 96.16 60.67 71.51 10.78 13.55 1.04 75.08 280.61 192.68 99.58 74.52 N.A. Nestel, Barry. (1972). Current utilization and future potential of cassava. In chronic cassava Toxicityed. Barry Nestel and Regi­ nald Maclnlyre IDRC, 01 Oe. Nweke, Felix 1. (1980) Consumption pat­ terns and their implications for research and production in tropical Africa,In Tro­ pical Root Crops: Research strategies for the 1980s ed. E.R. Terry, K.A. Oduro and F.Caveness. IDRC, Ottawa, Canada. Source: Central Bank of Ceylong (1979 to 1984) Sri Lanka, Customs (1980 to 1983) Ex­ ternal Trade Statlstlcs.Colombo, Sri Lanka.