A timely start to rains matters more to agrochemical firms than quantity1 min read . Updated: 01 May 2015, 01:18 AM IST
Delayed or erratic rains typically impact sowing and make farmers miss the application of agrochemicals, which the companies dread the most
Stocks of agrochemical firms have reacted uncertainly after the forecast of below-par monsoon by the India Meteorological Department. While Insecticides (India) Ltd and Dhanuka Agritech Ltd have held up well, gaining 1-4%, Rallis India and Excel Crop Care Ltd lost 2-3%.
The mixed mood stems from the fact that the amount of rainfall based on averages has limited influence on the demand for agricultural inputs. For the agriculture sector, what is more important is a timely onset and even distribution of rains that set farming activity into motion. Delayed or erratic rains typically impact sowing and make farmers miss the application of agrochemicals, which the companies dread the most.
A significant part of this agrochemical use takes place in the first half of the monsoon season, or June and July. Even if the rains abate in the second half, or fall into the deficit zone, it will impact the yield of crops at the most, provided there are no damages. However, timely onset of rains will ensure sowing has happened in the first place, says Sumant Kumar, an analyst at Elara Securities (India) Pvt. Ltd.
What do trends from the previous years say?
Last year, the southwest monsoon not only came late to Kerala, but its progress was also patchy. Halfway into the season, cumulative rainfall was 17% lower than the average. As a result, by the first week of August, sowing for the kharif crop was down almost 14%.
In 2013, the monsoon arrived on time and progress was good—cumulatively, rainfall was up almost 15%. It increased the kharif acreage 12% by the first week of August. In both these years, the initial trends held ground. Kharif sowing dropped in 2014, while 2013 saw a rise.
Kharif in 2012 also saw low rainfall initially and a drop in sowing area.
In a nutshell, if the rains are widespread and occur at regular intervals, even at 93% of the average, it will have a limited impact.
To be sure, the rains are only one part of the equation.
Demand for agricultural inputs is also influenced by prices of farm produce, rural incomes and overall sentiment, the outlook for which is not encouraging right now owing to the distress in rural India. Perhaps that is the reason why the trends are mixed.
The writer doesn’t own shares in the above-mentioned companies.