Agri input firms worry as dry spell looms large

Even though many States have declared a drought-like situation in some pockets of their respective territories, agricultural input companies are putting up a brave fight saying the situation is not all that bad and hoping it would have little impact on their bottomlines.

While the Met department, in its end-of-season report, said the country as a whole received 91 per cent of the long-period average rainfall of 89 centimetres during the four-month-long South-West monsoon season, several States reported deficient rains in some of their pockets.

Among the States that have witnessed a shortfall in rains are Gujarat (34 per cent below normal in Saurashtra and Kutch regions), Karnataka (29 per cent in North Interior Karnataka), Maharashtra (22 per cent low rainfall in Marathwada), apart from Bihar, Jharkhand and a few North-Eastern States where the rainfall deficit was above 20 per cent. In fact both Maharashtra and Karnataka have already declared a drought in certain areas and approached the Centre for financial assistance.

Early days

“If the drought conditions persist, it will have an impact on sales of fertilisers and crop protection products. But right now, it is a bit early to hazard a guess on the quantum of damage,” said an official with a state-owned fertiliser company, who did not want to be named.

One company that has been impacted by erratic rains already was agrochemicals and seeds firm Bayer CropScience. The company suffered a 25 per cent drop in its second-quarter profit on account of weather vagaries. “Sales were affected due to an erratic season marked by uneven rainfall and hailstorms that damaged standing crops in several parts of the country,” said Richard van der Merwe, Bayer’s Vice-Chairman and Managing Director, speaking last month.

MK Dhanuka, Managing Director of Dhanuka Agritech, on the other hand, said the loss of soil moisture being reported from some parts of the country is a concern. But, he said, his company would focus more on areas where the drought was not a concern so as to make up for the loss that it may encounter in the affected areas.

Insecticide (India) Limited (IIL), an agrochemicals firm, which reported a robust 19 per cent growth in the second quarter of the current financial year, said it anticipates the impact of the drought on its topline and bottomline would only be marginal. “The drought situations have only affected parts of Maharashtra, Tamil Nadu, and Gujarat,” said Rajesh Aggarwal, IIL Managing Director.

According to him, it is during the kharif season that IIL does the maximum business. “The first two quarters contribute 60 to 65 per cent of our business. Kharif season is the main season for us as it consumes major agro-chemicals with paddy and cotton crops grown in that season in most parts of the country,” Aggarwal said.

That said, rainfall was a bit erratic in parts of western, eastern and some parts of southern India in the current season. “Though the dams are full, which is a positive, the negative side is that because rainfall was very tight in some parts of the country, we experience some dry crops,” said Aggarwal, adding that the drought situation does not seem to be as grave as what was experienced a couple of season ago.

Non-urea impact unclear

However, it is still not clear how the increase in the prices of non-urea fertilisers — because of higher input costs on account of further depreciation of the rupee against the dollar — will impact the offtake of fertilisers. Most potassic and phosphatic compelx fertilisers have seen a 25 to 30 per cent increase in prices from October 1. “We have no choice but to pass on the increase in input cost to farmers,” said Suresh Krishnan, Managing Director of Zuari Global Limited, which owns fertiliser firms Zuari Agro Chemicals and Mangalore Chemicals and Fertilisers Ltd.

According to him, most fertilisers companies have been selling fertilisers at old prices. “The revised prices have kicked in just now. So, we would know how the offtake has been only after one or two months from now,” Krishnan told BusinessLine

Krishanan said that though some areas in Maharashtra and Karnataka, which are predominant markets for Zuari, witnessed some deficit in rainfall, reservoirs having good storage of water and relatively better irrigation infrastructure may be able to offset the problems associated with a rain deficit.

The problem, however, could be when farmer sentiments are affected if the country does receive good pre-monsoon showers and good rains early in the next monsoon season.

COMMENT NOW