Agriculture & Related Industry Analysis

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Must know facts:

Agricultural products is the 4th largest exported principal commodity with a share of 10 per cent of total exports of the country.
There are 2 major agricultural seasons in India: Kharif and Rabi.
Kharif season lasts from April to September (summer); rice (paddy) is the season’s main crop.
Rabi season lasts from October to March (winter); wheat is the season’s main crop.
During 2018-19* crop year, food grain production is estimated at record 283.37 million tonnes. India is the second largest fruit producer in the world. Production of horticulture crops is estimated at record 313.9 million metric tonne (MMT) in 2018-19 as per third advance estimates. Milk production in the country stood at 187.7 million tonnes in 2018-19, registering a growth of 6.5 per cent. Milk processing capacity is expected to double from 53.5 million MT to 108 million MT by 2025.

Information Source : Ministry of Agriculture

Influencing Factors for price change:

Watch out for agri related news from DIPP – According to the Department of Industrial Policy and Promotion (DIPP), the Indian agricultural services and agricultural machinery sectors have cumulatively attracted Foreign Direct Investment (FDI) equity inflow of about US$ 2.45 billion and the food processing sector has attracted around US$ 7.81 billion during April 2000 to June 2017.

Understanding the Industry:

“Kisaano ki Samriddhi”, the well-being of farmers is vital to the nation’s prosperity. Kisan is the sentinel of our food security. ‘Annadaata Sukhibhava’ has been one of our fundamental civilisational values. We all know that the agriculture sector is the backbone and crucial in our Indian economy which provides the basic ingredients to mankind and providing raw material for rapid industrialisation sector development. No doubt that the besides manufacturing sectors, Agriculture sector provides great employment opportunities for rural people/youth on a large scale for their livelihood and also provides an entrepreneurship.

Agriculture plays an extremely pivotal role in Indian Economy. Agriculture is the primary source of livelihood for about 58 per cent of India’s population. Gross Value Added by agriculture, forestry and fishing is estimated at Rs 18.55 lakh crore (US$ 265.51 billion) in FY19(PE). Growth in Gross Value Added (GVA) by agriculture and allied sectors stood at 2.1 per cent in H1 2019-20.

India is the second largest fruit producer in the world. Production of horticulture crops is estimated at record 313.9 million metric tonne (MMT) in 2018-19 as per third advance estimates. Milk production in the country stood at 187.7 million tonnes in 2018-19, registering a growth of 6.5 per cent. Milk processing capacity is expected to double from 53.5 million MT to 108 million MT by 2025.

Talking about Indian food industry – we could easily say that Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of India’s exports and six per cent of total industrial investment.

Estimated Market Size:

India ranks second in terms of availability of arable land with 127 diverse agro-climatic zones, having a share of 11.2% of the total arable land(suitable for sowing crops) in the world. In addition, the resource-rich country has the sixth largest food and grocery market and fifth largest retail market globally. Thus, India can provide a perfect blend of traditional and hygienic food, processed and packaged according to modern technology.

The Food processing industry in India is indigenous because simple home-based techniques such as fermentation have resulted in the creation of worldwide acknowledgment of Indian pickles, papads, chutneys and murabba.

Benefiting from such a geographical advantage, India is the largest producer of milk, bananas, mangoes, guavas, papaya, ginger, okra, second largest producer of wheat, rice, fruits, vegetables, tea, sugarcane and cashew nut and the third largest producer of cereals, coconut, lettuce, chicory, nutmeg, mace, cardamom and pepper globally.

Road Ahead:

Growth Drivers –

From Demand Perspective:
Population & Growth in Income, Increasing Exports, Favourable Demographics.

From Supply Perspective:

Introduction of Hybrid & Genetically modified seeds, Improved mechanisation, Better irrigation facilities.

Government Policy Dependence:

100% automatic FDI route needed in Storage, ware housing & Development of seeds, Long term irrigation funds by NABARD, Increase of MSD’s base (Managed service providers), Opening up of exports of wheat & rice.

India is expected to achieve the ambitious goal of doubling farm income by 2022.*@ The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers. India is expected to be self-sufficient in pulses in the coming few years due to concerted efforts of scientists to get early-maturing varieties of pulses and the increase in minimum support price.

Top Stocks in the industry:

Agriculture related stocks:

Fertilizers/Pesticides / Crop Protection Companies:

UPL, Deepak Fertilisers & Petrochemicals Corporation Ltd, Chambal Fertilisers & Chemicals Ltd, EID Parry India Ltd, Meghmani Organics Ltd & many more.

Tractors/Agriculture equipment manufacturers:

Escorts, Swaraj Engines, Supreme Industries, Action Construction Equipment (ACE), Mahindra CIE & many more.

(Please note above stocks are not recommendations, they are purely for information purpose only)

Information Source / References: IBEF, Ministry of Agriculture, The Economic Survey 2019–20, Agricultural and Processed Food Products Export Development Authority (APEDA), Department of Commerce and Industry, Union Budget 2019–20, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports.

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