Should the monsoon remain deficient for the rest of the season, will that impact the performance of seed processing companies? Indeed not. Seed being the first agri input each season, farmers purchase seeds well ahead of the start of the monsoon season, even as planting may commence closer to the onset.

Seed sales have thus been immune to the vagaries of the monsoon. According to data compiled by the Ministry of Agriculture, sales of certified seeds has remained healthy during the earlier drought years – 2002, 2004 and 2009. For instance, in 2009-10, when the country faced the worst drought since 1972, with monsoon rainfall being 21 per cent below normal, the distribution of certified seeds increased by about 12 per cent to 27.97 lakh tonnes. Thus, revenues of Kaveri Seeds, a leading player in cotton hybrid seeds, grew by about 32 per cent in 2009-10. The company’s operating profit jumped about 23 per cent that year. Likewise, sales of Monsanto India, market leader in hybrid maize seeds, rose by about 6 per cent that year. Even as Monsanto India’s seed sales and profits remained healthy, the company’s overall operating profit dipped 32 per cent, due to lower realisation for its glyphosate herbicide brand Roundup.

Seed sales are resilient to monsoon also because it is the farmer’s realisation and profitability that determine his cropping decision and subsequent seed demand.

Hence, an increase in minimum support price during drought years or increase in market prices of any particular agricultural commodity due to reduced output may boost the demand for its seeds in the coming season.

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