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			High inventory with their sales channel partners towards the end of the ongoing Rabi sowing season poses a threat for the sales growth of agri-input companies in the upcoming Kharif season, beginning June 2019.</div>
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			Analysts estimate 30-40 per cent year-on-year (YoY) increase in inventory with various channel partners. This is mainly on account of the rural distress, following low income of farmers from Kharif crops as their price prevailed below the minimum support price (MSP) almost throughout the season. Such a sharp increase in the inventory may pressurise sales and realisation from agri-input companies in the coming quarters.</div>
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			With estimates of a decline in acreage and output of Rabi season crops this year, such companies witnessed massive returns of sold goods from their channel partners due to weak sales in this season. While no major return of goods are expected in the rest of this season, sales during the upcoming Kharif season might be lower. Much, however, will depend upon the behaviour of monsoon.</div>
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			&ldquo;Higher sales returns, limited price hikes (4 per cent) and volume de-growth of 6 per cent have taken a toll on the overall performance in the quarter. The companies&rsquo; managements have cited the inventory, with their channel partners, at an elevated level of up to 30-40 per cent YoY for the industry,&rdquo; said Amar Mourya, analyst, Emkay Global Financial Services. Ebidta margins of domestic- centric agri input firms, however, are expected to remain lower in the next few quarters.</div>
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			Meanwhile, data compiled by the Union Ministry of Agriculture showed 4 per cent decline in acreage at 61.78 million hectares (ha) as of February 15, 2019 compared to 64.36 million ha by the same time last year.&nbsp;</div>
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			Owing to the lack of soil moisture in major growing areas, acreage under wheat declined by a marginal 0.46 per cent to 29.84 million ha. Similarly, sowing area under rice and pulses declined by a sharp 14.33 per cent and 5.91 per cent to 3.64 million ha and 16.61 million ha this season compared to 3.96 and 16.61 million ha during the previous year&rsquo;s rabi season respectively.</div>
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			Companies like Bayer and Monsanto have been better place due to their diverse product profile. Bayer&rsquo;s placement has been extremely good in Haryana and Punjab. Among the products placed in December quarter brands like Lucifer and Atlantis have seen 100 per cent liquidation during the season.&nbsp;</div>
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			Inventories for products such as Nativo and Solomon are expected to be liquidated up to 70-80 per cent. Overall sales return is expected to be around 10 per cent in other product ranges.</div>
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			&ldquo;Earlier, every market used to have Buyer&rsquo;s own distributors and thus, it was easy to dump inventories without sufficient liquidation for partner), and the stockiest directly provides to the dealer. This has helped to avoid dumping and better liquidations,&rdquo; said Ranjit Cirumalla, an analyst with Batlivala & Karani Securities.</div>
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			Meanwhile, use of agrochemical in cotton has increased in the states like Punjab and Tamil Nadu with per spray cost between Rs 600-700 an acre.&nbsp;</div>
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			Earlier sprays used to happen only for sucking pests and white fly, and common use of propiconazole and Manocozeb used to cost Rs 200-250 an acre, but now with wide variety of pest attacks like pink ballworm, the intensity and spreads have increased as well which will benefit only multinational companies with increased focus on crops like cotton.</div>
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Sharp rise in inventory may pressurise their sales and realisation going ahead, weak sales this season so far have already seen massive return of sold goods

High inventory with channel partners to jolt farm input firms next season

Sharp rise in inventory may pressurise their sales and realisation going ahead, weak sales this season so far have already seen massive return of sold goods