Interactive forum on WITHER EXPORTS IN THE NEXT FIVE YEARS Organized by EASL Spice Sector FAZAL M USHIN Director – Exports & Biz Dev. Link Natural Products (Pvt) Ltd Sri Lanka 1 E-mail : fazal@linknaturalproducts.com
2 Agricultural sector - 2012 • Total land under cultivation : 2, 645,000 ha (42.2%) • Agricultural contribution for total GDP : 9.27% • Spice crop production : 74,104 ha / GDP 0.14% Cinnamon Pepper Clove Nutmeg & M ace Cardamom
Comparison of production of 2005 vs 2012 Land Extent 2005 2012 % increase / (Ha) (Ha) Decrease Nutmeg 1,070 978 -9% Clove 7,779 7,612 -2.1% Black Pepper 29,156 31,667 9% Cinnamon 27,895 31,049 11% Cardamom 2,888 2,798 -3% Production 2005 2012 % increase / (M T) (M T) Decrease Nutmeg 1,865 2,002 7% Clove 6,093 4,009 -34% Black Pepper 14,265 18,604 30% Cinnamon 15,895 17,165 8% Cardamom 80 80 0% 3 Source : SAPPTA Annual Report
Nutmeg Growth of Production and export volume Black Pepper Clove Cinnamon Cardamom Source : SAPPTA Annual Report
Local Consumption - 2012 Commodity Consumption (M T) Nutmeg 327 Pepper 6,807 Clove 690 Cardamom 64 Cinnamon 5,211 Source : DEA 5
Productivity in 2012 (Sri Lanka) Commodity kg/ Ha kg/ Ha Nutmeg 2,000 5,000 Clove 500 200 Black Pepper 600 1,700 - 2,550 Cinnamon 600 1,200 Cardamom 30 250 Source : SAPPTA Source : DEA Stats 6
Average cost of production - 2012 Commodity Cost of Production Cost of Production (Rs/ kg) vs farm gate prices (%) 249.07 236 Nutmeg 368.61 214 Clove 230.86 260 Pepper 692.9 50 Cinnamon 985.0 97 Cardamom Source : DEA Average Farm Gate Prices (Rs) Commodity 2005 2006 2007 2008 2009 2010 2011 2012 244.88 235.36 278.12 316.23 331.87 459.62 742.53 838 Nutmeg 347.94 480.53 471.97 471.97 484.66 542.99 1,250.35 1,160 Clove 116.89 165.38 306.6 324.92 287.43 342.14 691.9 832 Pepper 395.48 431.09 599.62 664.35 621.95 726.57 921.9 1,042 Cinnamon 744.15 716.92 913.25 1,718.27 1,732.32 3,320.96 2,713.12 1,946 Cardamom 7 Source : SAPPTA Annual Report
Export performance Export Volume 2005 2012 % increase / (M T) (M T) Decrease Nutmeg 1,925 1,551 -19% Clove 4,198 1,404 -67% Black Pepper 7,821 10,825 38% Cinnamon 12,365 14,435 17% Cardamom 11 9 -18% Export Value 2005 2012 % increase / (Rs bn) (Rs bn) Decrease Total 9.4 30.2 221% Ex Rate 100.49 Ex Rate 127.60 Note: rupee value has been depreciated by 27% 8 Source : SAPPTA Annual Report
N utmeg Growth of Export Value Black Pepper Cinnamon Clove Cardamom 9 Source : SAPPTA Annual Report
Composition of main spice exports -2012 10 Source : Spice Sector report – CCC
Global Production of Spices and Sri Lanka's Contribution - 2012 Commodity Production (M T) SL contribution % 342,590 3 Pepper (Green, Light, Bold) White pepper Pepper light berries 15,000 13 Nutmeg BWP Nutmeg whole Cinnamon 15,000 90 Cloves 120,000 3.34 Source : Spice Board of India/ IPC
Essential Oil Growth of Export Volume Commodity 2009 2010 2011 2012 (M T) (M T) (M T) (M T) Nutmeg Oil 23 13 22 25 Clove Oil 1.5 14 13 3 Black pepper Oil 0.05 5 8 12 Cinnamon Leaf Oil 107 155 231 318 Cinnamon Bark Oil 7 7 8 9 Cardamom Oil 0 0.3 1 0.8 Growth of Export Value 2009 2010 2011 2012 (Rs M n) (Rs M n) (Rs M n) (Rs M n) Total 312.5 687.0 1,354 1,430 Growth Y/ Y % 120 % 97% 6% 12
Composition of main Essential Oil exports -2012 Source : SAPPTA annual report 12/13 13
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15 M ajor destinations of Essential oils • USA • UK • France • India • Germany M ajor destinations of Spices • India • Germany • M iddle East • North & South America
Total Spice sector value Sector 2009 2010 2011 2012 (Rs M n) (Rs M n) (Rs M n) (Rs M n) Spices 12,287 20,175 23,446 30,202 Essential oil 312.5 687.0 1,354.0 1,430.0 Total 12,599.5 20,862 24,800 31,632 Growth y/ y (%) 65 % 19% 27 % * * The industry vision is to reach 100,000 M n by 2020 16
Challenges in the industry • Increase productivity • Lack of long term backward integration & collectivization • Lack of initiatives for moving up the value chain • M arketing • Legislative hurdles 17
18 Challenges in the industry • Increase productivity 70% are small holder family farms 1 to 2 acers Acceptable post harvest practices – GM P/ Quality parameters Better agronomic practices • Lack of long term backward integration & collectivization Establishing effective supply chain and linkages between all players in the industry Producers Collectors Exporters Processers
Challenges in the industry cnt.. • Lack of initiatives for moving up the value chain Focused R&D Cost of Technology inputs Product development • M arketing High cost of establishing brands Private labeling Organic products • Legislative hurdles 19
Strategy for Next 05 Years • Increasing productivity • Product diversification - Identify emerging new products / markets • Develop a national strategy for whole / value added spices by public and private sector stakeholders. • R & D and New Technology 20
21 Strategy for Next 05 Years • Increasing productivity Engage plantation companies to grow new crops and expanding the existing cultivation in spices. Introduce better agronomic practices to small holder farmers. • Product diversification & M arketing - Identify emerging new products / markets M arket research Establishment of brands & financial support Private labeling contracts Ground Spices , Spice mixes, beverages Continuous support of participation in sectoral & brands (not the country wise)
Strategy for Next 05 Years cnt.. • Develop a national strategy for whole / value added spices by public and private sector stakeholders. Private sector allow to take a lead role in developing a national policy - market driven M ake relevant government agencies such as EDB, DEA accountable to stake holders Ensure all CESS levied on spice is channeled back to the industry. Allow imports of raw materials for value addition without hindrance. Financial concessions & incentives to engage in agriculture & value addition, tax holidays, low interest long term loans for establishing of brands, development of organic spices, essential oils, oleoresins, extracts etc., Ensure maximum benefits to spice sector by negotiating existing or proposed FTAs • R & D and New Technology Encourage to develop new products for Fractions , Isolates and CO 2 (Organic/ Conventional) Active ingredients for Nutraceuticals , Cosmoceuticals, Pharmaceuticals industry 22
23 Potential new crops Turmeric Ginger Davana Vetiver Coleus Sandalwood Patchouli
Value added products 24
25 THANK YOU FAZAL M USHIN Director – E & BD Link Natural Products (Pvt) Ltd Sri Lanka E-mail : fazal@linknaturalproducts.com
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