Cinnamon & Sri Lanka

Page contains overview of cinnamon production with special reference to Sri Lanka

Cinnamon in the history of Sri Lanka

Sri Lanka the �Spice Island� is renowned for the spices export for time immemorial.
Cinnamon, pepper, cardamom, clove and nutmeg are the major spices which have an
export significance to Sri Lanka. Cinnamon (Cinnamomum verum syn.Cynnamomum
Zeylanicum) is one of the oldest and most significant spice grown in Sri Lanka.
Cinnamon was a popular spice in ancient Arab world and was used as cosmetic and
pharmaceutical ingredient as well. Firstly the Arabs and then Europeans became the
traders in cinnamon and this brought Sri Lanka in contact with other parts of the world.
As reported by Wijesekara et al ( 1975), Cinnamon played a major role in world history,
by motivating the Christopher Columbus to discover the new world and Vasco De Gama
to South India and Sri Lanka. The traditionally known cinnamon was the peeled
cinnamon bark rolled in to the quill form, which facilitate storage and transportation.
Cinnamon oil distillation would have probably commenced during the Dutch regime.

Except true cinnamon, almost all other EACs are cultivated in many other countries in
large bulk form and as such Sri Lanka has the comparative advantage only in the
Cinnamon market . For the other spices comparative advantage lies in niche markets
where intrinsic quality.

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Economic analysis of cinnamon production

Cinnamon makes a considerable contribution towards the export income generated

from Agricultural plant products in Sri Lanka. The importance of this spice to the
countries economy was highlighted by the Hon. Minister of Finance & Planning, Dr.
Sarath Amunugama, M.P, in his budget speech in 2005.

�Sri Lanka produces more than 90 percent genuine cinnamon (Cinnamomum

Zeylanicum Blume) in the world. Our exports account for 63 percent of all spice exports
in the world. Cheap low quality alternatives have begun to enter the global market
leading to increased competition. There is an urgent need for increased investment in
research and product development for value addition in cinnamon. Efforts to give
�Ceylon Cinnamon� maximum protection under WTO agreement are being
intensified. Investments in marketing �Ceylon Cinnamon� is essential to combat this
competition. I propose to impose a cess of Rs.2.50/kg. or 0.5% of the value which ever
is higher for the development of this industry. The Government will contribute Rs.10
million to set up a Cinnamon Development Fund�.

The best quality cinnamon was produced in Negombo District. The major product of the
cinnamon plant is quills. It is account for 63% of the volume and 72% of exchange
earning. Other bark products are quilling, featherings, Chips, ground cinnamon,
cinnamon powder, leaf oil and bark oil. According to Department of Export Agriculture
reports ( Anura Herath, J.Weerasinghe 2004 ),Over 90,00 ha of wet zone land is Under
Export Agriculture Crops (EAC), accounting for 9% the land under all perennial crops.
There over 250000 small scale growers involved in cultivation and about 60000 of them
depends on EAC as their main family income. In comparison to world market price,
Except for pepper and clove (Which are exported to India ), prices of other products
have a notably low price, compared to world market prices.

Cinnamon bark as well as other cinnamon products has wide applications in food and
perfumery industries. They are also used in pharmaceutical and essence industries.
Cinnamic aldehyde, the major constituent in the cinnamon bark oil, is an important food
flavoring agent. Cinnamon oleoresin, an important product of cinnamon, has similar
applications in the food industry. Euginol, an aromatic compound, extracted from
cinnamon leaf oil is often used for flavoring toothpaste along with mint and eucalyptus
oils.

The main producing area of cinnamon is the costal belt; Galle (10647 ha), Matara
( 5477 ha), Rathnapura ( 3620 ha ), and Hambantota (1,985 ha). (DEA Report 2003 )
According to Dept. of Export Agriculture statistics Existing extent of cinnamon
plantation at the end of 2005 was 26051 ha. As per the 2005 data of the Department
of Export Agriculture, total extent of cinnamon is increased by 819 ha during last 5
years ( Data obtained from Central Bank)

Cinnamon at present is the dominant spice in Sri Lanka in terms of the foreign
exchange earnings. The share lies on cinnamon in terms of the export of Agricultural
products in 2004 and 2005 were .0. 86% and 0.96% respectively. In 2005 Total foreign
exchange earnings from cinnamon was above the earnings from rubber by 11.3
million dollars . Cinnamon revenue growth in 2005 was 23.1% above the export
earnings over 2004 figures. .( table 1 ).

Table 1. Agricultural Exports in US $ millions ( Source Central Bank report 2005)

Commodity 2004 Share % 2005 Share

%
Total Agric. 1065.2 18.5 1153.8 18.2
Export
Tea 738.9 12.8 810.2 12.8
Rubber 51.3 0.9 46.9 0.7
Coconut 113.1 2.0 113.3 1.8
Cinnamon 49.7 0.86 61.2 0.96

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About 10000 families are actively involved with cinnamon industry. Sri Lankan
Government thus emphasis on developing the cinnamon industry by providing
subsidies, credits, extension and research inputs and assistance for cinnamon based
value added products. Subsidies and credits are given for new planting, replanting and
rehabilitation. A total of Rs 16.4 mln. 15.16 mln and 8.2 mln were given as cash grants
to the cinnamon industry during 2001, 2002 and 2003. ( Admin. Report DEA,2003 )

The average age of cinnamon plantation in Sri Lanka is around 40 years and about
20% are over 70 years of age. Small holder cultivation is the dominant type, which are
in average about 0.5 ha ( 1.5 acre ). The size of holdings has been diminishing and only
5-10 % of the plantations are of sizable extent ranging from 8 - 20 ha. (Economic
Research report No. 18,DEA2003)

The potential production level of quills as per the estimates made by the DEA ( 2003),is
about 1000 kg/ha, in the age of 7 year plantation, which can be maintain at this level till
about 40 years with the adoption of good management practices. Gross income and
expenditure analysis for a new establishment of a plantation is given in the table 2.

Table 2 Annual cost and returns for establishment and maintenance of a 1 ha. land
( Report DEA )

Years 1st
2nd year 3rd year 4th year 5th year 6th year 7th year 8th year Rest
year
Labour
cost 36049 10370 17284 30617 41481 46420 51358 56296 56296
Rs.
Materi
al
10150 7370 9250 9250 9250 9250 9250 9250 9250
inputs
Rs.
total
cost 46199 17740 26703 40206 51577 58208 65684 74006 74006
Rs.
Gross
income 60720 151440 214600 253300 296600 343500 343500
Rs/ha.
net
return 34017 11234 163023 195092 230916 269494 269494
Rs/ha

How ever as per the survey conducted by Anura Herath ( 2003 ), Average productivity
of the cinnamon plantations at present lies around 388 kg/ha and 623 kg/ha for mixed
and mono cropping status of land management. This is mainly associated with lack of
investment attitudes of growers due to high labor involvement in cinnamon peeling .

Traditionally cinnamon is cultivated as a mono- crop in large holdings. At present about

90% of cinnamon holdings are cultivated as a mono-crop . The balance 10% has
coconut as an intercrop, and in areas such as Ratnapura and Kalutara, it cultivates with
other types of perennial crops.

Sri Lanka is the largest producer of Cinnamon in the world accounting for about 65 - 70
% of the global production, with Seychelles, Madagascar, India and other suppliers
collectively contributing the balance. Sri Lanka exports spices to about 70 countries in
the world with Mexico, India, USA and Europe being the major buyers.

Export market for cinnamon as per the available data of the Sri Lanka Customs ( 2004)
are given in table 3. Accordingly Major cinnamon quills importers are Latin American
countries, which constitutes 85.2 % of the total export earnings. Share comes to EU
countries was 2.2% ; USA had 9.0% of the share. Thus major importing countries are
Spanish speaking countries with Mexico, Colombia, Peru Guatemala in front line and
USA. According to the reports of the customs 39 countries have imported the cinnamon
quills including the EU countries.

Table 3 Major Ceylon cinnamon quill importing countries ( 2004 ) ( Source SL

Customs 2005 )

Country Total exportValue in RS mln Share from total

Tons export (%)
All the 3602
countries
Mexico 4773 2140 59.0
Colombia 648 250 7.0
Peru 463 171 4.7
Guatemala 204 97 2.7
Ecuador 533 199 5.5
El Salvador 108 43 3.4
EU 150 80 2.2
USA 752 323 9.0

With growing concern on health hazards associated with synthetic flavoring agents used
in food industry, there is an increasing preference for natural flavors all over the world.
Thus, the demand for cinnamon oil is expected to grow steadily in the future with the
growing population and expansion and sophistication of the food industry.
However though this crop is of such importance and has been grown in Sri Lanka for
centuries, there has been hardly any improvement in its productivity in the last few
decades. In addition to that estimated loss of the products according to DEA report by
Anura Herath, J.Weerasinghe (2004 ), due to high moisture content is US $ 2.2
million/year which is about 3% of the foreign exchange earnings from total EAC
exports.

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