Browsing by Author "Atapattu, Nihal K."

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    Rice policies in Sri Lanka: analysis of supply response with endogenous technology
    Atapattu, Nihal K. (Virginia Tech, 1996-06-04)
    Sri Lanka achieved a high level of self-sufficiency in rice in the 1980s through a series of investments on irrigation, technological change, and marketing and trade policies. However, more than two decades of expansion in the international rice market has diminished the validity of rice self-sufficiency policies as an economic development strategy. As a consequence, trends in the international market through their impacts on reducing investments such as rice research, extension, and irrigation development have adversely affected the ability of Sri Lanka to maintain the same levels of rice self-sufficiency in the future. In the domestic policy area however, some degree of indecision exists in undertaking reforms necessary to take advantage of the trends in the international rice economy. Given the overwhelming influence rice has on the direction of national agriculture policies in Sri Lanka, it is critical to resolve this indetemlinacy pertaining to rice policies. The objectives of the present study are to estimate the producers' response to numerous policy variables that impact on the levels of rice production, and the country's ability to manage food-security under a regime of market-friendly policies. A supply response model based on the choice of technique approach with endogenous determination of technology was specified to capture the effects of policy variables on rice output determination. The dynamic effects of technology, prices, and investments on productivity are therefore accounted for in the model. The supply response system is composed of blocks of equations for determination of investment in quasi-fixed inputs, choice of technology, and yields. Data for the period since 1974 during which notable changes took place in the rice supply situation in Sri Lanka were used in the analysis.. Results suggest that a major share of rice output growth in Sri Lanka is explained by the producers' response to government-supplied, technology-related variables such as irrigation and research. Rice supply response to input and output prices was slight relative to the response to technology variables. Model simulations showed that, under a regime of more market friendly policies, continuation of current investment trends and policies would lead to a worsening of rice self-sufficiency levels over the next 10 years. It was also observed that with modest growth in irrigation and research investments, it is possible to maintain rice self-sufficiency at levels comparable to the present.
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    Stabilizing export revenue through futures markets: an application to cocoa exporting countries
    Atapattu, Nihal K. (Virginia Tech, 1986-07-05)
    Many developing countries that rely heavily on primary commodity exports to provide a major portion of their exchange revenues confront large variability in their incomes. This has been a factor of major concern to the developing countries as revenue instability is considered to deter development as well as affect the welfare of those engaged in production of such commodities. Producing countries have adopted several programs and policies that attempt to lessen the price and revenue instabilities, or to raise export receipts. These attempts based on various commodity agreements have met with limited success. More attention has been paid to the alternative market solutions to this problem as international action even among producers has proven ineffective. Futures market is an obvious choice since well organized futures markets exist for most of the primary commodities. The present study investigated the potential of futures markets as a means of obtaining lower variance in revenue using the data from cocoa markets in London and New York. Data for four representative cocoa producers were analysed to develop strategies that reduce the variance in revenue. Two hedging strategies based on optimal hedge ratio concept and three selective strategies were tested for their ability to reduce risk and also to maintain the revenue trade-offs at a lower level. The analyses were carried out using two sample periods each 29 and 22 years long and tested in a 4 year data base outside the sample. The results confirmed that the producers facing both price and quantity risks in their production should only hedge a portion of their output. Adoption of a variance minimizing or utility maximizing hedges at a higher levels of risk aversion parameter as well as some selective strategies for hedging were found to give lower variance in revenue. There was always some trade-off associated with adopting these strategies. Selective strategies obtained a reduction in revenue with less trade-offs compared to optimizing strategies but were limited by the requirements of large cash outlays to meet the margin payments. For countries depending heavily on the revenue from cocoa hedges based on variance minimizing or utility maximizing strategies would be preferred over selective strategies. The ability to make good crop forecasts would greatly improve the success of hedging.