Is AgroChemicals A Good Sector For Long Term Investment ?

 With current population of 1.24 billion India currently has the second largest population in the world. In the coming decade its expected to surpass China to become the highest populated country in the world.  17% of the world population lives in India but we have only 11% of the world ‘s arable land. of 179 million hectares and also our yield per hectare is low in the world.  Every year we annually lose crops worth 250,000 crore  owing to pest attacks and  poor storage facility.

What are agrochemicals ?

Agro chemicals are the chemicals which are mainly used to protect the crops. This included insecticides, herbicides/ weedicides, fungicides and
plant growth regulators/stimulants etc. Fertilizers like urea doesn’t fall in the category of agro chemicals.

Why India needs more food and more agrochemicals

  • India ranks at 55th position at global hunger index (source: economictimes ) we trails behind countries like  Nepal (44) and Sri Lanka (39).
  • India has 224.6 million undernourished people as nearly a fifth of the country’s population does not receive the minimum number of calories required by an average individual, says the  Global Food Security Index (GFSI). (source )
  • 51% children suffer from moderate to severe anaemia  (Source: ijrhc.org)
  • 55.3% married women suffer from anemia (Source: agritech.tnau.ac.in).
  • 40.4% of children under the age of three years old are underweight (Source: pib.nic.in).
  • Considering rising incomes and population growth, it is estimated that by 2020 and 2050 the foodgrains requirement is likely to be 278.6 and 450 million tonnes respectively.
  • Around 85% of crop loss can be controlled through safe use of plant protection chemicals.
  • India’s crop yield per hectare is low.

Indias crop yield

Because the farm land is reducing each year and population is increasing each year, we don’t have any other way to feed the billion people other than increasing the food production and improving the storage facility.  Due to a growing non-agricultural use of land, the percentage share of agricultural land has declined from 59.9% in 2004-05 to 59.7% in 2007 (Economic Times), making it imperative to produce “more from less for more”

The present state of agrochemical industry in India

In India the numbers of plant protection chemicals registered by CIB and RC were only 248 as on 14th May 2014, while the number was over three times more in the US. [Source: Central Insecticides Board and Registration Committee]

India’s per capita plant protection chemicals consumption of 0.6 kg/ha is among the lowest in the world; the plant protection chemical consumption in Taiwan and Japan is 17 kg/ha and 12 kg/ha respectively. The low per capita consumption of plant protection chemicals in India is attributed to low purchasing power of farmer, arising from their small individual land holdings and lack of awareness.

The Indian agrochemical industry’s size was estimated to be US$ 3.8 billion in year 2012. The domestic agrochemical demand is growing at
around 8-9% and export demand at 15-16%.The domestic plant protection chemicals market is projected to grow at a CAGR of 9% from INR 105 bn in 2012 to INR 180 bn by FY18.

The use of plant protection chemical is very low in India.

agro chemical use in india

(Industry reports, Analysis by Tata Strategic Management Group; cf. FICCI. 3rd Nat. Agrochemicals Conclave 2013, July, New Delhi)

Challenges

Agriculture sector is perhaps the most critical and vulnerable and is exposed to climates, global warming, land use, government actions and urbanization. Any bad monsoon or drought/flood like situation effects the profitability of agri chemicals companies.

Conclusion: With increasing population and shrinking agriculture land. We don’t have any other way to meet the food requirement of this large growing population other than increasing the production. This requires the use of agro chemicals. It shows that this sector will continue to remain a growing sector for years to come.

Disclaimer: The contents present in this article are just for information purpose not any advice for investment. Readers are requested to do their own study and consult their financial advisor before investing.

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  1. Aravind
    December 21, 2014

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