Amid a weak business environment, herbicides remain a bright spot for agrochemical firms. The herbicides business, which has been outperforming the agrochemical market growth for the past several years, is forecast to grow at strong pace in the next few years too.
Manpower shortage and high agricultural wages are driving demand for herbicides. Historically, the availability of an abundance of low-cost workers meant there wasn’t much of a need for herbicides, as the work of uprooting the unwanted plants could be done manually. But as wages rose, manual weeding has become an expensive affair, which in turn is driving demand for herbicides.
According to Avendus Capital Pvt. Ltd, in the five years to 2014, the herbicides market expanded at an average annual pace of 15%, faster than the 10-13% growth registered by insecticides and fungicides. Insecticides are used to kill insects, while fungicides destroy fungi. The total agrochemical market is estimated to grow by 12% per annum.
Avendus Capital forecasts the insecticides and fungicides market growth to moderate to 10-12% in 2014-2019. But herbicides are expected to maintain the growth tempo. From $900 million in 2014 the herbicides market is estimated to double to $1.8 billion in 2019. “This trend is expected to continue going forward, with strengthening demand arising for herbicides from increased mechanization and reduced labour intensity of agricultural practices, higher labour cost arising from urbanization and reduction in rural population,” Avendus Capital said in a note.
Not surprisingly, companies are realigning their product portfolios to capture the strong growth in herbicides. Five of the 20 new products Bayer CropScience Ltd is planning to launch by 2020 are in the herbicides category. The company aims to increase the contribution of revenue from herbicides from 17% now to 40% by 2020, Edelweiss Securities Ltd said in a note.
According to B&K Securities India Pvt. Ltd, Rallis India Ltd has launched two new herbicides in the first half of the current fiscal year. The company is expected to ramp up these products in the coming season. Similarly, Dhanuka Agritech Ltd launched three herbicides in the last two years. The product for sugarcane received good response and the company expects sales to pick up in the coming year.
India is catching up with the global trends in agrochemical usage. World over, herbicides constitute around 45% of the agrochemicals market, compared with 16% in India, points out Avendus Capital.
But due to the reasons cited earlier, and an increased focus on horticulture crops, the market for herbicides is growing at a strong pace. While this should please industry participants, other factors like agricultural produce prices and farm profitability will also have a bearing on demand.
The writer does not own shares in the above-mentioned companies.