ALWAYS – INVEST IN WHAT YOU KNOW & WHAT YOU CAN UNDERSTAND. DEVELOP CURIOSITY AS A TRAIT
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.
- According to the Ministry of Agriculture, total food grain production in the country in May 2017, stood at around 273.38 million tonnes. India imported 2.7 million tonnes of wheat in FY17 (till January 16, 2017) and an additional 1.2 million tonnes are to be imported by February 2017.
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. As per ministry of Agriculture – Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. As per the 2nd advised estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) is estimated to be 17.3 per cent of the Gross Value Added (GVA) during 2016-17 at 2011-12 prices.
Since 2010, production as well as yield of both major crops – rice and wheat has increased significantly. In FY16, production of rice stood at 103.61 million tonnes, whereas, production of wheat stood at 93.82 million tonnes. Backed by robust output of wheat, rice and pulses due to a heavy rainfall in 2016, the country’s food grain production increased by 8.7 per cent to a record high 273.83 million tonnes in 2016-17.
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:
Considering consensus reports from Ministry of Agriculture – India’s GDP is expected to grow at 7.1 per cent in FY 2016-17, led by growth in private consumption, while agriculture GDP is expected to grow above-trend at 4.1 per cent to Rs 1.11 trillion (US$ 1,640 billion).$ It ranks third in farm and agriculture outputs. As per the 2nd Advance Estimates, India’s food grain production is expected to be 271.98 MT in 2016-17. Wheat production in India is expected to touch an all-time high of 96.6 MT during 2016-17.! Production of pulses is estimated at 22.14 MT.
India is emerging as the export hub of instant coffee which has led to exports of coffee reaching 177,805 tonnes valued at US$ 447 million between April-August 2017, as against 162,641 tonnes valued at US$ 363.1 million during the same period last year.
The production of food grains in India reached a record 275.68 million tonnes (MT) during FY 2016-17, as per the Fourth Advance Estimates (AE) released by the Department of Agriculture, Cooperation and Farmers Welfare, Government of India. India has been the world’s largest producer of milk for the last two decades and contributes 19 per cent of the world’s total milk production.
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 2016–17, Agricultural and Processed Food Products Export Development Authority (APEDA), Department of Commerce and Industry, Union Budget 2017–18, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports.
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