Stocks of seed and fertiliser makers lost 3 to 5 per cent in trade on Wednesday. This follows the downward revision of South West monsoon forecast by the Indian Meteorological Department (IMD).

The IMD, had on Tuesday, said that it expected rainfall during the June-September season to be 88 per cent of the long period average (LPA). This is lower than the preliminary forecast made in April, when it forecasted monsoon rainfall to be 93 per cent of the LPA. The LPA is the average rainfall received during the 1951-2000 period.

But, does poor monsoon mean bad news for seed and fertiliser sales? Not quite. An analysis of historical data suggests that consumption of key agri inputs - fertilisers, seeds and pesticides don’t directly respond to the South West monsoon rainfall pattern.

Consider the years 2002, 2004 and 2009 when the monsoon rainfall was significantly below normal. Sales of fertilisers and seeds have remained resilient during these years.

For instance, in 2009, 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 8 per cent to almost 28 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 during that year.

Likewise fertiliser sales also rose 6 per cent in 2009. This is because, farmers purchase agri inputs – seeds and fertilisers - ahead of the actual onset of the monsoon rainfall. Also, the huge subsidy provided by the Government on fertilisers particularly urea (subsidy is about three-forth the cost of manufacturing) has helped sustain the growth momentum.

Companies such as Chambal Fertilisers and RCF that produce urea have thus been insulated from the vagaries of the monsoon and have managed to clock a healthy profit growth in 2009-10.

However, a deficient monsoon may have a marginal impact on te sales of complex (phosphatic and potassic) fertilisers, prices for which have been decontrolled since April 2010. Coromandel International and GSFC are among the key players in the complex fertilisers space.

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