Sector Update | 30 May 2020
Agriculture
Agriculture
Crop damage from locust attack unlikely as Rabi harvest
complete…
…however, horticulture at risk
Over the last few days, swarms of locust have been sighted in parts of Rajasthan,
Maharashtra, Madhya Pradesh (MP), Uttar Pradesh (UP), and Gujarat. Therefore, we
interacted with Mr Pradeep Dave, President of the Pesticides Manufacturers &
Formulators Association of India (PMFAI), and industry players, and analyzed the impact of
the locusts on farmers and agrochemical players. The key insights are highlighted below:
Locust attack: Definition and degree of severity
The desert locust is a short-horned grasshopper. Innocuous when solitary,
locusts undergo a behavioral change when their population builds up rapidly.
They enter the ‘gregarious phase’ by forming huge swarms that can travel up to
150 km per day, eating up every bit of greenery on their way.
These insects fly during the day and are known for feasting on all sorts of plants
and standing crops. They destroy flowers, fruits, leaves, seeds, bark, and
growing points.
If not controlled, locust swarms can threaten the food security of a country.
In India, locusts are normally sighted during July–October, along the Pakistan
border.
What led to their early arrival?
– This can be traced back to the cyclonic storms
Mekunu and Luban that had struck Oman and Yemen, respectively, in 2018.
These turned large desert tracts into lakes, facilitating locust breeding, which
continued through 2019. Swarms attacking crops in East Africa reached peak
population from November, and have multiplied exponentially in southern Iran
and Pakistan since the beginning of 2020, with heavy rains in East Africa over
March–April enabling further breeding.
Rabi harvest starts in April and ends in May. Thus, farmers currently do not
have major standing crops on the field at risk of attack. However, horticulture
(fruits and vegetables) crops are at risk of a washout in Rajasthan,
Maharashtra, MP, UP, and Gujarat.
MP, UP, Gujarat, Rajasthan, and Maharashtra cumulatively contribute 38% to
India’s 312MMT of horticulture production (2017–18).
Vegetables constitute 59% of the horticulture production in India, and the
above-mentioned states cumulatively contribute 39% to production.
31% of the horticulture production in India comes from fruits, and the above-
mentioned states account for 40% of this production.
Summer fruits in India include mango, watermelon, orange, muskmelon, sweet
lime, jackfruit, black plum, lychee, pineapple, figs, and ice apple.
If the locust attack is not curtailed, horticulture production at these states
would be impacted.
Generally, January–March is the period for the sowing of sugarcane; any locust
attack may impact sugarcane crop in UP. UP constitutes 45% to the normal
sugarcane sowing area of India.
Early arrival of locusts a blessing in disguise for standing crops…
…however, horticulture at risk
Research Analyst: Sumant Kumar
(Sumant.Kumar@MotilalOswal.com); +91 22 6129 1569
Darshit Shah
(Darshit.Shah@motilaloswal.com); +9122 6129 1546 /
Yusuf Inamdar
(yusuf.inamdar@motilaloswal.com); +91 22 7193 4239
Investors are advised to refer through important disclosures made at the last page of the Research Report.
30 May 2020
1
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 Motilal Oswal Financial Services
Agriculture
Measures attempted to curb spread
Pesticides are used by the government and farmers to curb the spreading of the
attack (refer to Exhibit 1 for the list of pesticides currently used).
Pesticides mainly used to control locusts are Chlorphyrifos (Sumitomo
Chemicals, Gharda, UPL, Coromandel, Insecticides India, and Bharat Rasayan),
Melathion (Rallis, Coromandel, and Sumitomo), and Deltamethrin (Bayer Crop,
Insecticides India, and Meghmani).
Currently, the country has deployed 89 fire brigades with pesticide spray, 120
survey vehicles, 47 control vehicles with spray equipment, and 810 tractors
mounted with sprayers for effective locust control, as per the requirement on
different days.
On the 28
th
May’20, the Union Agriculture Minister announced (in its press
release) that 15 sprayers would arrive from Britain over the next 15 days.
Besides this, 45 more sprayers would be procured over 1–1.5 months. Drones
would be used to spray pesticides on tall trees and inaccessible places for the
effective control of locusts. Moreover, plans are afoot to deploy helicopters with
aerial spray. An adequate stock of pesticides is being maintained (53,000 liters
Malathion) with locust-control organizations.
Loss currently limited, but risk persists
The outbreak has to stop before the arrival of monsoon rainfall in June/July,
when the locusts would mature and breed. If infestation is not controlled, it
would pose a threat to kharif crop.
As per a media article, the situation could worsen, with more swarms expected
to reach India via Pakistan from the Horn of Africa in June. Thus, this poses the
risk of a second wave of attack in the kharif season.
View
The impact of the locust attack is currently minimal given that the Rabi harvest
is already complete (impact expected on horticulture produce); however, if the
attack is not curtailed, it would pose a risk to kharif production, in turn
impacting farm profitability.
Coromandel International and UPL in our coverage universe are likely to benefit
from pesticide sales for controlling the locusts.
However, an uncontrolled attack would affect kharif profitability, thereby
reducing the use of pesticides/fertilizers. This may weigh on the performances
of agrochemical companies.
We have a Buy rating on PI Industries and Coromandel, and Neutral rating on
UPL.
Key highlights from call with Mr. Pradeep Dave, President of PMFAI
Most of the harvest for the standing crop is already complete; thus, the
damage from the locust attack is not severe currently (horticulture and
sugarcane may see some loss).
Locusts could affect the sowing of the crops as well.
A locust attack was witnessed six months ago too, but the government was able
to control it. Additionally, by leveraging technology, the locust attack could be
curtailed in an effective way currently, which was not the case a few years back.
Pesticides used to control locusts are Chlorphyrifos, Melathion, and
Deltamethrin, all products indigenously manufactured in India. A 15–20% surge
may be expected in demand for these pesticides.
2
30 May 2020
 Motilal Oswal Financial Services
Agriculture
Locusts are inactive at night or in the early morning; this is when the pesticides
are sprayed.
Africa is currently witnessing its second wave of locust attacks. This is 20 times
worse than the swarms that made their way through the region two months
ago.
The Indian government recently proposed a ban on 27 pesticides, accounting for
20% of the market. The last time that the government banned pesticides, they
formed 5–7% of the market. Thus, this did not impact agrochemical players.
Generic pesticides form 50% of the Domestic Pesticides market of INR200b.
Exhibit 1: Pesticides that can be used to fight locust attacks
Chemical Name
Chlorphyrifos
Deltamethrin
Lamba cyhalothrin
Melathion
Bendiocarb
Diflubenzuron
Company
Sumitomo Chemicals, Gharda, UPL, Coromandel, Insecticides India, Bharat Rasayan
Bayer Crop, Insecticides India, Meghmani
Rallis, Syngenta, Atul, Nagarjuna, Coromandel, Bharat Rasayan, Insecticides India
Rallis, Coromandel, Sumitomo
Bayer crop
Hindustan Insecticides, Gharda Chemicals, Dow, Chemtura
Source: Industry, MOFSL
Exhibit 2: Previous locust control campaigns
Year
1993
Area treated (ha) Pesticides used (Kgs/lit.)
6,88,255
July–Oct,
Yellow/ Pink desert locust hoppers & swarms (190
30,934
3,10,482
1993
Nos) (Jaisalmer, Barmer, Jalore, Bhuj)
47,577
36,860
July–Oct, Yellow/ Pink desert locust hoppers & swarms (04 Nos)
7,974
23,596
1997
(Jaisalmer & Barmer)
3,660
July, 2002
Migratory locust population (Jodhpur)
42
42
Sept to
Loose pink swarm and hoppers (Jodhpur, Bikaner,
10,476
December,
16,640
Jaisalmer)
1,883
2005
April to
Loose pink/ yellow swarm and hoppers (Jodhpur,
September,
536
536
Bikaner, Jaisalmer)
2007
October to
November,
Hoppers/ fledgling (Jaisalmer)
4,700
4,700
2010
Migratory Locust, etc. (Leh area of J&K)
Tree locust, etc. (Jodhpur)
Tree locust, etc. (Jodhpur)
1,205
40
40
1,928
Period
Type of Campaign
Pesticide
BHC 10% Dust
Dieldrin 18%
Malathion ULV
Fenitrothion ULV
Fenitrothion ULV
Malathion ULV
Malathion 96% ULV
Malathion 96% ULV
Fenitrothion 96% ULV
Malathion 96% ULV
1997
2002
2005
2007
2010
Malathion 96% ULV
Chloropyriphos 20%
EC
2016 June, 2016
November,
2016
November,
2017
2017
2016
40 Malathion 96% ULV
40 Malathion 96% ULV
Source: Industry, MOFSL
30 May 2020
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 Motilal Oswal Financial Services
Agriculture
Exhibit 3: Over the last two decades, horticulture production has overtaken food grain production in India
Production of food grains (in MMT)
Production of horticulture (in MMT)
Source: Agricoop, MOFSL
Exhibit 4: Trend in fruit and vegetable production in India
Fruits (in MMT)
147
75
76
Vegetables (in MMT)
156
81
162
89
163
90
167
169
178
93
97
184
101
51
55
111
60
115
66
128
69
129
72
134
90
Source: Agricoop, MOFSL
Exhibit 5: Key horticulture-producing states in India – 312MMT (2017–18)
Uttar Pradesh
West Bengal
Maharashtra
21.1%
12.6%
Madhya Pradesh
10.4%
1.3%
3.8%
5.5%
6.8%
6.9%
7.2%
7.9%
8.5%
8.0%
Andhra Pradesh
Karnataka
Tamil Nadu
Rajashtan
Gujarat
Bihar
Odisha
Others
Source: Agricoop, MOFSL
30 May 2020
4
 Motilal Oswal Financial Services
Agriculture
Exhibit 6: India’s key vegetable-producing states – 184MMT (2017–18)
Uttar Pradesh
20.3%
0.9%
3.7%
3.9%
4.6%
4.8%
6.6%
9.5%
6.7%
8.6%
Haryana
Rajashtan
Chhatisgarh
Others
15.4%
Madhya Pradesh
15.0%
Maharashtra
Odisha
Bihar
Gujarat
Karnataka
West Bengal
Source: Agricoop, MOFSL
Exhibit 7: India’s key fruit-producing states – 97MMT (2017–18)
Andhra Pradesh
19.5%
0.8%
2.8%
4.0%
5.3%
5.8%
7.4%
7.6%
9.2%
10.8%
15.6%
Uttar Pradesh
12.0%
Madhya Pradesh
Tamil Nadu
West Bengal
Rajashtan
Gujarat
Karnataka
Bihar
Chhatisgarh
Others
Source: Agricoop, MOFSL
Maharashtra
Exhibit 8: Fruit and vegetable production in Gujarat contributes 7.2%/6.6%/9.2% to Indian horticulture/vegetable/fruit
production, respectively
Source: Ministry of Food Processing Industries, MOFSL
30 May 2020
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 Motilal Oswal Financial Services
Agriculture
Exhibit 9: Fruit and vegetable production in Maharashtra contributes 8%/6.7%/12% to Indian horticulture/vegetable/fruit
production, respectively
Source: Ministry of Food Processing Industries, MOFSL
Exhibit 10: Fruits and vegetable production in MP contributes 8.5%/9.5%/7.6% to Indian horticulture/vegetable/fruit
production, respectively
Source: Ministry of Food Processing Industries, MOFSL
30 May 2020
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 Motilal Oswal Financial Services
Agriculture
Exhibit 11: Fruits and vegetable production in UP contributes 12.6%/15.4%/10.8% to Indian horticulture/vegetable/fruit
production, respectively
Source: Ministry of Food Processing Industries, MOFSL
30 May 2020
7
 Motilal Oswal Financial Services
Agriculture
Exhibit 12: Fruit and vegetable production in Rajasthan contributes 1.3%/0.9%/0.8% to Indian horticulture/vegetable/fruit
production, respectively
Source: Ministry of Food Processing Industries, MOFSL
30 May 2020
8
 Motilal Oswal Financial Services
Agriculture
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 Motilal Oswal Financial Services
Agriculture
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Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
30 May 2020
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