Indian Agriculture Sector — Unseasonal Weather Disturbance Cause Havoc In Few Districts: Systematix

Systematix Research Report

Sudden western disturbance caused some parts of India to face heavy showers and hailstorms during the second week of March. The India Meteorological Department report cited that thunderstorms were observed in several areas such as Madhya Pradesh, Haryana, Uttar Pradesh, Delhi, Punjab, Saurashtra and Kutch, Vidarbha, East Rajasthan, and Jammu and Kashmir.

Our interactions with farmers and agchem dealers reveal that while the inclement weather has damaged more than 70% of the crops in some districts, the damaged portions are not more than 5% of the total agriculture area in those states.

This means not more than 5% of the farmers are likely to be adversly impacted, although crops such as wheat, mustard, pea, grapes, garlic and channa have faced extensive damage.

Since the agrarian crisis is limited to certain districts and not to the entire state, we believe at the state level, farmers’ incomes should remain healthy, as favorable weather during the season has led to better yields and higher demand has kept prices bouyant.

Live water storage available in 143 main reservoirs is at 46% of the total live storage capacity, which was 50% last year and at an average 40% in last 10 years.

Crop prices have been bouyant, with prices of key crops such as wheat and paddy trading 18-25% above minimum support price. We believe farmers would be encouraged to increase sowing activity in the upcoming kharif season if current prices sustain over next three months, and provided there is sufficient ground water level.

However, due to lower consumption of agrochemicals during the rabi season, channel inventory is high and we expect high sales return in March.

Some dealers have told us that companies have extended the credit period by three-five months in order to delay sales returns but this will result in high channel inventories and result in muted volume growth in Q1 FY24.

Looming threat of El-Nino can also have an adverse impact on agrochemical demand.

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