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Published on 15/07/2019 2:34:17 PM | Source: Prabhudas Lilladher Ltd

Fertilizer Sector - Cautious optimism post rain spells By Prabhudas Lilladher

Posted in Broking Firm Views - Sector Report| #Prabhudas Lilladher Ltd #Fertilizer Sector #Sector Report

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Cautious optimism post rain spells!!

We visited rural areas around Hyderabad and interacted with Agri-input channel partners and large farmers to understand the ground realities w.r.t. agriculture and agri-input sales in the largest agri-inputs market (Andhra Pradesh & Telangana combined). We interacted with mainly large farmers considering their key position to drive demand for agri-input companies.

 

Key takeaways are:

* Crop Sowing has been delayed by ~20 days (right from seeds to pesticides). Post rain spells in the last week of June, seed sales are nearing completion whereas enquiries for pesticides are picking up. Cotton acreage is expected to expand but Kaveri Seeds is unlikely to gain market share as Rasi Seeds’ RCH659 brand is gaining traction. Sale of illegal HTBT variety of seeds is rampant this year as well.

* Large farmers use modern tools & techniques and have a very professional approach which enables them to earn healthy profit from farming, on sustainable basis. A horticulture farmer (~47 acres) earning ~Rs 25-30 lakhs p.a had invested Rs 2.5 lakh for metal wiring atop on his 2-acre tomato farm (net plantation area- 1 acre) and Rs 4.0 lakh in drip irrigation.

* Large farmers do not shy away from leasing large tracts of land for farming as it gives them economies of scale. One farmer had closed down his agri-input shop and started farming 2 years on a 100 acre leased land. Another farmer who was farming on 47 acres had taken 40 acres on lease.

* Products of Bayer, Syngenta, PI, UPL, etc are widely accepted. In Seeds, brands like ATM and Jadoo of Kaveri Seeds, RCH 659 of Rasi, Ujwal of Tulasi seeds are well accepted. Urea of Nagarjuna Fertilisers and NPK grades of Godavari (Coromandel) are mostly used by farmers.

* Due to delay in sowing this year, there is possibility of outbreak of thrips and whitefly.

* Farmers had shown resistance in buying agrochemicals after large price increase last year in products like Profenofos, Phorate, etc. Phorate prices have increased from Rs 60/Kg last year to Rs 110/kg this year.

* Rallis, Adama, Nagarjuna, Swal and Crystal are offering higher credit periods while PI, Bayer, Dhanuka and BASF offer lower payment timelines. Rallis is also offering lucrative cash discounts for prompt payments and willing to take back products even before 120 days.

* Adama giving competition a run for their money: Adama has become very aggressive in India. Apart from applying loss leader policy in Acephate, they are expanding distribution and making inroads by going through direct dealer model, offering higher credit period to dealers.

 

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