Gains in crop protection may continue in India
May. 21, 2010
The stocks of companies that are in the crop protection business such as Rallis and Bayer Crop Science have gained over 50 per cent since the beginning of year. If one were to go by the India Meteorological Department (IMD) projections of a normal monsoon, then their good run is likely to continue.
More than the IMD forecast, it is the potential of the crop protection business itself that is expected to be the key for the progress of these equities in the long run.
There is a unanimous view on the outlook of the crop protection industry being positive. The main driver of the sector is the growth prospects that are seen at 3.2 per cent a year. A research report says the compounded annual growth of the sector could be 10 per cent in the next 3-4 years.
The second factor is the growing demand for food and improving living standards in India. With the land for cultivation shrinking every year, the only way to feed the country or to keep the imports at a bare minimum is to improve yield. This is where crop protection comes into play and the sector holds promise.
One of the problems faced by the sector is the lack of patent protection in the country.
It has affected the introduction of new formulations in the country. Moreover, the entry barriers for new players However, with over 40 ingredients going off the patent list before 2013 there is plenty of opportunity for the established companies. There is still a problem with the Pesticide (Management) Bill, 2008 though over the protection of test data. Growth of the sector is also likely to be driven by the immunity some of the pests and insects have developed to various insecticides and pesticides.
The increasing resistance, in fact, offers development opportunity to the crop protection firms. Though the usage of crop protection measures has been minimal all these years, the farmers improving economic condition is expected to encourage them to go for it in the coming years. An example is the behavior pattern in the plantation sector. Improved income has resulted in better crop management.
With Indian companies enjoying from the product patent offered by the Centre rather than process patent and some more formulation set to be available in the near future, the crop protection market is set to grow.
The other factor that holds promise is the farmers quest for better returns, which invariably leads to switching over from one to another crop. When a farmer is assured of better return, it will lead to better crop management and, in turn, increased consumption of insecticides, herbicides and pesticides.
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