Erratic monsoon may affect sales of agrochemical companies

Erratic rains and its impact on kharif crop sowing is likely to impact sales of agrochemical companies. Manufacturers of insecticides, pesticides and other related products can see a muted sales growth this year.

"The biggest challenge in our industry is monsoon. The deficit this year will impact the industry in some manner. The double digit growth of last year can come down to single digit. Chances of a decline in sales are also not ruled out", M K Dhanuka, Managing Director of Dhanuka Agritech told Business Today.

Dhanuka, whose company clocked annual sales of Rs 740 crore last year, said the company was seeing good growth till June in anticipation of a normal monsoon.

However, the unsold inventory with dealers and stockists changed the situation in July. The company had seen a growth of 26 per cent in the last fiscal when monsoon was above normal.

This year, the monsoon arrived on June 6, according to the India Meteorological Department (IMD). The normal date for onset of monsoon is June 1, which was also the date it arrived last year. The IMD had also scaled down its monsoon forecast from 95 per cent (announced in April) of the long-period average (LPA) to 93 per cent. LPA is the average rainfall received over a period of last 50 years.

Last year, the monsoon was 106 per cent of the LPA. In the June to July 22 period of the monsoon season, the deficit has been 27 per cent.

A total of 34.65 million hectares were sown with various kharif crops as on July 19 this year, according to data from the agriculture ministry. This is 44 per cent lower than the corresponding area last year.

A revival in rains and narrowing of deficit is expected between now and September but delayed showers have impacted sowing of crops like pulses, oilseeds and cotton. Some states may end the season with a drought.  Gujarat, Maharashtra and Andhra Pradesh , where the usage and consumption of agrochemicals is high, face the possibility of a drought.