Locust attack may boost agrochemical companies in India

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Even as challenges to tackle coronavirus related issue continue to stay, Locust attack in India across the states of Rajasthan, Madhya Pradesh, and parts of Maharashtra in the past few days has triggered major concern over the Indian agriculture sector. However, the pest attack is likely to create additional demand for agrochemical companies in India.

Brokerage and research firm ICICI Securities in a research said that companies with strong Balance Sheets and moats like established brands and distribution will be likely winners here.

“Though many insecticides or combinations can be used to control locusts, Chlorpyrifos is one of the key insecticides. While most agrochemical companies generate some revenues from Chlorpyrifos, Gharda chemicals (Unlisted) is one of the major players in India,” the report was quoted by Financial Express. 

However, shortage of agrochemicals in trade due to lockdown post COVID-19 and logistics and transportation issues may not allow faster access of agrochemicals to farmers.

The consumption of agrochemicals may increase in the near term as farmers get worried about the crops. ICICI Securities expects such disruptive events to provide stimulus to the usage of agrochemicals in India and expect structurally higher growth rates of agrochemicals in India.

The ICICI Securities believes that there is no immediate impact as there is a negligible standing crop in the Mar-June period in India but such disruptive events create awareness among farmers and provide stimulus to the usage of agrochemicals. 

Though many insecticides or combinations are used to control locusts, considered one of the most destructive pests in the world, chlorpyrifos is one of the key insecticides. While most agrochemical companies generate some revenues from chlorpyrifos, Gharda Chemicals, an unlisted company, is one of the major players in India.

Locusts, which look like common grasshoppers, come in swarms during dry spells and can destroy massive swathes of vegetation within days.