ON
K'
Thus by the end of 1973, 102,604 acres had been replanted in the small-
holding sector (see Table 2.13).
The total areas of different groups given by the Rubber
Control Department and the figures given for new plantings are not
reliable. The errors in the figures for the total area (of all groups)
given by the Department were revealed by the Agricultural Census in 1962
which showed that an area of some 105,000 acres registered at the
Department as being under rubber was in fact either abandoned or under
other crops. A smallholders' replanting survey of two selected villages
conducted by Hansen (1969) found extensive discrepancies between the
registered and actual areas. He found that in certain areas there were
large areas of unregistered rubber. The Sample Survey of Rubber
Smallholdings of 19 71-72 confirmed these findings and cast doubt on the
picture of the age structure of the tree population given by figures from
the Rubber Control Department, and consequently on the planting and
replanting behaviour of smallholders in the 1950s and 1960s. Thus,
according to figures given in Table 2.13, 37 per cent of trees are of
pre-1953 vintage. Since there was little planting done in the 1930s and
1940s, this would imply that a large proportion of the trees are well
over 40 years of age. However, data collected in the 1971-72 sample
survey show a quite different position. Only 4 per cent of the trees were
over 30 years of age in 1971-72. In fact, over 85 per cent of the total
was less than 20 years of age (see Table 2.14). Our own field observations
tend to confirm this finding that only a tiny proportion of smallholdings
1 , 37 is very old.
^^ It was mentioned above that there is near unanimity in official circles about the disastrous implications of failure to achieve an annual target of replanting 3 per cent of the total acreage on which the RRSS operates. This is indeed surprising in view of the (well known) facts regarding the age distribution of the tree population. A 33 year optimum replanting
cycle (assuming that such indeed is the case even though no economic analysis has ever been done to justify this figure), implies a 3 per cent per annum
63
The proportion of replanted rubber in the smallholding sector, according to this survey, is given in Table 2.15.
The proportion of the replanted acreage in the <10 acre group, computed from the data given in A Report on the Sample Survey of the Rubber
Smallholdings of Sri Lanka (1971-72) shows that 49 per cent of the total acreage is replanted. Taken together with the information on the age structure of the trees given from the data in the same survey, this shows that significant new plantings have taken place in this period (1950s and 1960s). Since new plantings are not eligible for a subsidy, most of the cultivators may not have taken the trouble to register their holdings or to obtain permission to plant.
The total rubber acreage that has been newplanted according to the Rubber Control Department in this entire period is less than 10 per cent
38
of the area replanted. Since this acreage is not given in a disaggregated form, it is not known how much of this would have been planted by smallholders,
A major problem with data given by the Rubber Control Department is that it does not allow disaggregation of the smallholdings (<10 acre) group further. This is a serious disadvantage particularly as the behaviour of different groups within the smallholdings group may be dissimilar. Thus there are no data available on the distribution of the pre-1953 smallholders rubber area between different size groupings within this sector. The age structure of the trees shown in Table 2.14 does not indicate any significant differences among these groupings at present. However, as shown in Table 2.15, the ratios of replanted to new planted areas are clearly different. target for replanting only if the age distribution of the tree population is uniform; this however is obviously not the case. (Such a uniform
distribution would imply that nearly 40 per cent of the trees would be over 20 years of age whereas the actual figure is less than 15 per cent.) Thus the percentage of rubber which falls due for replanting in any given year varies, even if all other factors remain constant.
A G E G R O U P S groups 1 2 3 4 5 6 7-10 10-20 20-30 >30 Unspecified <2 3.0 2.0 4.4 5.0 4.4 4.5 15.8 • 49.5 8.8 1.6 0.1 2-5 3.6 2.7 4.2 5.1 3.8 3.9 14.4 46.1 12.2 3.8 0.2 5-10 3.1 2.0 3.8 4.6 3.2 4.5 15.0 50. 7 9.4 3.5 0.2
Source: A Report on the Sample Survey of the Rubber Smallholdings of Sri Lanka (1971-72).
TABLE 2.15
REPLANTING AND NEWPLANTING BY ACREAGE GROUPS
AS A PERCENTAGE OF TOTAL PARCELS Acreage
group
Replanted Newplanted Unspecified
<2 32.9 6A.2 2.8 2-5 52.0 46.1 1.9 5-10 64.6 32.0 4.4
Source: A Report on the. Sample Survey of the Rubber Smallholdings of Sri Lanka (1971-72).
ON Ui
T h e r e f o r e , i f the s i z e d i s t r i b u t i o n of the smallholder area in the pre-1953 p e r i o d was s i m i l a r to the current d i s t r i b u t i o n , then we may
i n f e r that many smallholders have abandoned t h e i r rubber holdings or replaced them with other crops ( i . e . , there has been l i t t l e r e p l a n t i n g ) . On the other hand, the data may i n d i c a t e that new plantings were higher amongst the smaller h o l d i n g s . The true answer may l i e between these two p o s s i b i l i t i e s .
2 . 4 . 5 The Replanting Response: An Econometric Analysis
In the absence of sucli disaggregated data, the planting response of the smallholders can be i n v e s t i g a t e d only at a very general l e v e l . This, t h e r e f o r e , l i m i t s the value of an econometric analysis of the acreage
supply response of d i f f e r e n t producer groups as that carried out by
Herath ( 1 9 7 5 ) , f o r the i n v e s t i g a t i o n of behavioural patterns of d i f f e r e n t smallholder groupings. This analysis used a modified version of the French-
39
Matthews (19 71) supply response model to examine the replanting response of the l a r g e and medium p l a n t a t i o n s and the smallholdings s e c t o r (<10 a c r e s ) , over the p e r i o d 1953-71.
The s p e c i f i e d function f o r estimation considered the annual replanted acreage to be a function of the p r o f i t a b i l i t y of rubber, the p r o f i t a b i l i t y of a l t e r n a t i v e c r o p s , the expected change in y i e l d , a weather v a r i a b l e , the non-bearing acreage and the rubber replanting subsidy..
In the actual e s t i m a t i o n , the p r o f i t a b i l i t y of the a l t e r n a t i v e crops and the expected change in y i e l d were omitted. The former was omitted f o r the smallholders on the ground that no c l o s e competitor to rubber was
a v a i l a b l e as a cash c r o p ; the l a t t e r on the ground that y i e l d expectations would have remained s t a b l e over the p e r i o d .
^^ Herath, H.M.G., 'A Study of Supply Response of Rubber in Sri Lanka', unpublished Master's degree t h e s i s , Australian National U n i v e r s i t y , 1975.
67
Both these assumptions are open to serious criticisms. As mentioned previously, large areas of rubber have been converted to other crops over this period; this would indicate that at least in certain areas, and under certain conditions, there did exist close competitors to rubber. Regarding yield expectations, since this period saw the large scale introduction of high yielding clones and their diffusion among smallholders, the yield expectations would have changed substantially over the period. Given the weaknesses of these assumptions and the use of the Colombo consumer price
index to deflate prices and the subsidy, the results of the estimation should be interpreted cautiously.
According to Herath, the results 'clearly indicate the importance of profitability as a determinant of replanting by all groups'. Noting that the profitability variable explained approximately 70 per cent of the variation in the annual rate of replanting by the smallholders, Herath concludes that 'there is no evidence of alternative objectives being
predominant in this group as the study shows the profitability variable to
40
be an important determinant of the replanting behaviour'.
In other words, the implication of the estimated function is that the replanting behaviour of rubber smallholders seems to fit into a broad
framework of profit maximisation.
In the absence of further disaggregated data and analysis, the question as to whether all groups in the smallholder sector behave in this manner cannot be determined simply from this estimation. Particular caution is necessary because the skewed nature of the distribution of ownership
concentrates a large proportion of the rubber lands in this sector in the 4i
hands of the bigger smallholders. This could have the effect of obscuring
Ibid.
^^ A Report on the Sam-pie Survey of the Rubber Smallholdings of Sri Lanka
(1971-72), Ministry of Plantation Industries, Republic of Sri Lanka, Colombo,
a different pattern of behaviour of the smaller farmers. This is an
empirical question and is part.of the subject of this study. Results of
the field survey and discussion of this question are given below in
Chapters 6 and 7.
2.4.6 Conclusion
The discussion in the previous sections has shown how smallholder
cash crop cultivation and, in particular, smallholder rubber passed
through a number of different stages in the course of its history.
Within these stages the decision-making environment of the small-
holder has shown varying features. The early period of smallholder
rubber was one of rapid and spontaneous expansion of new plantings.
While it received an initial stimulus from the plantations, it subsequently
developed a momentum of its own that lasted right up to the end of the
1920s when the world-wide depression and the International Rubber
Regulation Agreement ended it. It was a period when the intensity of land
use and the opportunity cost of converting it into a rubber holding were
low, price and income expectations high and the price of rubber relative
to other cash crops and purchased consumer goods was extremely favourable.
Then a period of relative stagnation followed which lasted for some two
decades; the decision problems in this period were focused on the short
term question of intensity of exploitation and levels of output and not on
long term investments. Then the aftermath of the Korean War-inspired
price boom found the industry in need of large scale asset renewal in
an environment of market optimism, with high price and yield expectations.
A sustained program of Government intervention scored some major initial
successes. Presently, the same problem is posed in a much different
situation of high inflation, political and social instability and
69
yielding rubber is, however, now even more acute, particularly from the national viewpoint.
An understanding of the decision-making process of the smallholders - particularly in relation to the long term investment called for in asset replacement of perennial crops - is an important prerequisite for
effective policy measures. Here it is necessary to draw attention to the fact that rubber smallholders have been and are of two major types: those working on their own lands (using family labour) and smallscale 'investors' in rubber. The term smallholder - used in Sri Lanka to denote all who have less than 10 acres of rubber smallholdings - while sufficient for
statistical purposes^ is inadequate and misleading when applied to questions of decision making. The differences between types of smallholders within this general category need to be taken into account.
In subsequent chapters we will develop a model of asset replacement applicable to the problem of rubber replanting using the conventional approach adopted in investment theory. We shall then discuss the special
features of peasant farms and the necessary modifications to conventional decision models on the basis of data obtained during the field survey.
CllAi'TER 3