Agrochemical firms hopeful of a good Q2 FY17: IIFL

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Published: August 18, 2016 6:03:16 AM

Cumulative monsoon rainfall over June 1-August 15 remains 1% above normal despite a drop in rainfall over the past week.

Cumulative monsoon rainfall over June 1-August 15 remains 1% above normal despite a drop in rainfall over the past week. The vast majority of the country has received good rains, and crop acreages are now 7% above normal as of August 11. Acreages of all major crops are up smartly, with the lone exception of cotton.

Consequently, the USDA’s August update reveals a further drop in India’s expected cotton inventories, underpinning the recent bullish trend in domestic prices of cotton. Agrochemical companies expect a good Q2 FY17 ahead for the industry. As of August 11, Bt cotton acreages across India were down to 8.2million hectares, 21% below the normal acreages of 10.3million for this time of season.

Overall cotton acreages are only 12% below normal, but the area under non-Bt cotton has risen sharply this year to 1.7m ha (vs. a normal of 0.9m ha), hurting the Bt cotton hybrids industry. The decline is across all major states. The US department of agriculture’s August supply-demand update was neutral-to-negative for all major crops except cotton.

Prices of major crops held steady in India over the past month, whereas globally, there was a sell-off in crop prices due to continued oversupply. With domestic prices holding steady and acreages up smartly (except in cotton), agrochemical companies are hopeful of a good Q2 FY17. However, seed companies have so far reported subdued results, and fertiliser volumes were down 8% year-on-year (y-o-y) in July.

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