Agrochemical firms may report a below-par performance for the July-September quarter this fiscal as uneven distribution of the monsoon has impacted spraying activities due to lower pest infestations during the kharif season.

While central and southern peninsula regions received higher precipitation during the monsoon, north-west and eastern India received deficit rainfall, impacting the kharif crop coverage. The cumulative rainfall as of September 23 was up by 7 per cent of the long period average (LPA) largely led by better rainfall recorded in the central and southern peninsula up 20 per cent and 27 per cent, respectively. This was partially offset by lower-than-expected rainfall in north-west and eastern India, down 8 per cent and 17 per cent of the LPA respectively.

Brokerage report

As a result of uneven rains, sowing has remained mixed, with overall acreage being lower by 1 per cent of the normal area. While the acreage under paddy, pulses and oilseed was lower for the season, cotton and coarse cereals saw an increase in the coverage.

Companies such as Bayer CropScience and Dhanuka Agritech are likely to report mid-single digit to low double-digit growth for the September quarter over the same period last year, a report by brokerage firm Prabhudas Liladhar said.

The higher placement of agrochemicals during the March and June quarter coupled with slower on-ground activities led by uneven rainfall, resulted in lower liquidation of inventories.

Companies with higher sales of herbicides and fungicides such as PI Industries and UPL will continue to do well in kharif season, the report said. While better sales of branded generics will continue just like last year, companies more active on the ground level such as Dhanuka, Adama, Syngenta and Bayer are likely to reap maximum benefits, it said.

High inventory

The report said channel inventory remains higher, particularly for insecticides category, led by higher carryover of last year coupled, with the dumping of few insecticides molecules such as Monocrotophos, Cypermethrin, Acephate from few large players in March and June quarter. However, uneven rainfall added to the woes, as liquidation is slower at ground level making it difficult for further inventory push into the market. “With kharif 2022 season largely behind us now, we expect higher sales return (v/s last few year average) for the industry during this year,“ the report said.

“Though good soil moisture and water reservoir levels augur well of upcoming rabi season, the dent which has been made in H1FY23 due to uneven rainfall coupled with a higher base of last year which is likely to pose challenges for domestic agri-input players. While on exports front adverse weather conditions, particularly in US and European markets, can exert some pressure in near term,” the report added.

Related Topics
comment COMMENT NOW