Agri presentation 7th_sept2009

311
-1

Published on

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
311
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Agri presentation 7th_sept2009

  1. 1. Indian AgricultureSelf Sufficiency – A myth or reality?
  2. 2. Disclaimer This presentation contains certain “forward looking statements.” These forward looking statements that include words or phrases such as Bajaj Hindusthan Limited (the "Company") or its management “believes”, “expects”, “anticipates”, “intends”, “plans”, “foresees”, or other words or phrases of similar import. Similarly, statements that describe the Company’s objectives, plans or goals also are forward- looking statements. All such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Such forward looking statements are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management. Neither the Company nor any of its advisors nor any of their respective affiliates, shareholders, directors, employees, agents or advisers makes expressed or implied representations or warranties as to the accuracy and completeness of the information contained herein and neither of them shall accept any responsibility or liability (including any third party liability) for any loss or damage, whether or not arising from any error or omission in compiling such information or as a result of any party’s reliance or use of such information. The information and opinions in this presentation are subject to change without notice. This presentation does not constitute a placement document, prospectus or other placement document in whole or in part. This presentation shall not constitute an offer to sell or the solicitation of an offer to buy any security. There shall be no sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification under securities laws of such state or jurisdiction. This presentation must not be distributed to the press or any media organization. This presentation is not an offer for sale of securities in the United States. The securities of the Company have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"). The securities of the Company may not be offered or sold in the United States or to or for the account or benefit of U.S. persons (as such term is defined in Regulation S under the Securities Act) absent registration under the Securities Act or pursuant to an exemption from registration. There will be no public offering of the Companys securities in the United States.
  3. 3. India- Brief demographic profile CAGR CAGR since since 1950 1960 1970 1980 1990 2000 2009 1950 2000 At current prices Gross Domestic Product Rs Crore 9719 15083 40405 110887 442134 1786526 4933183 11.14% 11.95% Agriculture Rs Crore 4801 6404 16747 34384 117796 409660 861753 9.20% 8.61% Manufacturing Rs Crore 1056 2009 5578 19840 74995 264114 780405 11.85% 12.79% Services Rs Crore 1162 2190 4744 12579 51238 233549 691221 11.44% 12.81% Others Rs Crore 2700 4480 13336 44084 198105 879203 2599804 12.35% 12.80% Population Census Lakhs 3611 4392 5482 6833 8463 10286 11660 2.01% 1.40% Rural Lakhs 2987 3603 4391 5239 6291 7425 NA 1.84% Urban Lakhs 624 789 1091 1594 2172 2861 NA 3.09% Population Census Rural % 83% 82% 80% 77% 74% 72% NA NA Urban % 17% 18% 20% 23% 26% 28% NA NA Per Capita Income Rs 267 326 675 1,630 4,983 17,980 37,490 8.75% 8.51% Net Sown Area Million Hectares 119 133 140 140 143 141 #142 0.35% 0.08% Net Sown Area % 41.80% 44.60% 46.20% 46.00% 46.90% 46.30% NA Agriculture as % to GDP % 49% 42% 41% 31% 27% 23% 17%Source: GOI-Ministry of statistics and programme implementation, Census of India, Ministry of Agriculture- Directorate of Economics and Statistics, bugdet.ap.gov.in# Based on 2005-06 data Growth rate of land under sowing is abysmal which may cause lower production of agriculture items. The only option is yield improvement to feed the growing population
  4. 4. India World ranking in production and consumption Production Consumption Ranking RankingRice 2 After China 2 After ChinaWheat 3 After EU, China 3 After EU, ChinaSorghum (Jowar) 3 After Nigeria,USA 3 After Nigeria,MexicoMillet (Bajra) 1 1Sugar 2 After Brazil 1Cotton 2 After China 2 After China Source: Based on crop year 2009 United States Department of Agriculture India is the swing factor for rice, wheat, sugar and cotton on a global basis
  5. 5. Growth rate of yields Yield Kg per Hectare CAGR since 1950-51 2002-03 2007-2008 1951 Rice 668 1744 2203 2.12% Wheat 663 2610 2785 2.55% Sorghum (Jowar) 353 754 981 1.81% Millet (Bajra) 288 610 1030 2.26% Sugar Cane 33422 63576 67531 1.24% Cotton 88 191 466 2.97%Source: Ministry of Agriculture- Directorate of Economics and Statistics Yield improvements are insignificant over the past six decades
  6. 6. Minimum Support Price (MSP) growth Rs per Qtl 17 year 3 year 1992-93 2002 2006 2007 2008 2009 2010 CAGR CAGRRice 270 530 570 580 645 850 950 7.68% 17.88%Wheat 330 620 650 750 1000 1080 NA 7.69% 18.44%Sorghum (Jowar) 240 485 525 540 600 840 840 7.65% 15.87%Millet (Bajra) 240 485 525 540 600 840 860 7.80% 16.78%Sugar Cane 31 62.05 79.5 80.25 81.18 81.18 107.76 7.60% 10.32%Cotton 800 1675 1760 1770 1800 2500 2500 6.93% 12.20%Source: www.agriculture-industry-india.com, Ministry of Agriculture- Directorate of Economics and Statistics Increase in MSP fuelling rural economy but distorting cropping patterns
  7. 7. Performance of companies having rural presenceCompany Category Unit 2004 2005 2006 2007 2008 2009 CAGRHero Honda Two Wheeler Lakh Unit 20.70 26.21 30.01 33.37 33.37 37.22 12.45%Maruti Suzuki Cars Lakh Unit 4.21 4.87 5.27 6.35 7.11 7.22 11.39% Customers inBharti Mobiles crores 0.71 1.18 2.1 3.9 6.42 9.67 68.59%Turnover Rs CroresHindustan Uniliver * FMCG Rs Crores 10,888 11,975 13,035 14,715 NA 17,319 9.73%Tata Tea (standaloneresult) Tea Rs Crores 783 900 982 1071 1153 1379 11.99%* Proportionate for 12 Months for 2009. Data for year 2008 is not availble since company changed it year end closing during that period** For Maruti suziki domestic sales have been consideredSource: website of respective companies Rural wealth creation has become the mainstay of the economy in general
  8. 8. Why are yields not improving? Loan waivers for farmers Loan waiver schemes by the Central and State Governments NREG scheme The recently launched NREG Scheme provides guaranteed employment for 100 days and a minimum wage of Rs. 100 per day MSP which covers 70% population Government ensures Minimum Support Price (MSP) for almost all major crops. MSP increases every year thereby disjointed of market realities. Progressive land fragmentation Every successive generation drastically increases fragmentation and mitigates use of modern farming techniques to improve productivity and yields. If land parcel boundaries were to be removed, India will have 7% more cultivable area. Improper fertiliser usage The imbalanced subsidy on urea has resulted in excessive usage and has depleted the land of phosphates and other micro-nutrients
  9. 9. Why is supply not catching up? Land for agriculture declining Limited cultivable land which is further lessened by more lucrative alternate usage like SEZs etc. Continuance of agriculture a major problem The new generation is far better educated and is richer. Agriculture does not interest them and is a national issue. No efforts by Government to improve water table or irrigation Across India, the water table is declining at an alarming rate and land is becoming less and less fertile as evidenced by increased fertiliser usage for same output. No concerted efforts are in place either by the Government or at the grass root level. Resistance to change The typical farmer is completely averse to any change in farming techniques or use of newer seeds etc. Crop Switching Farmers habitually switch crop based on the revenue that he gets from revision in support prices
  10. 10. Domestic demand & supply - foodgrains Million Tonnes 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Opening Stock 16 12 16 18 23 31 1 1Production 185 195 203 216 219 184 219 220 222 224 225Imports 0 7 2 1 0 0 - - - - -Availability 201 213 221 235 241 214 219 222 222 224 225Consumption 184 192 196 202 208 213 218 223 229 235 241Exports 6 5 7 10 3 1 - - - - -Closing Stock 12 16 18 23 31 1 1 (2) (7) (11) (15)Stock to Use% 6% 8% 9% 11% 15% 0% 1% -1% -3% -5% -6% Increase % incr Y Source: USDA upto 2007 Foodgrains include Wheat, Rice,Barley,corn,millets and sorghum Yon Y on Y MMT 1968 15 22% 1976 19 21% 1978 14 14% 1981 17 16% 1984 22 18% 1989 29 23% 1993 11 7% 1997 17 10% 2002 14 7% 2004 36 22% 2008 13 6% Max increase 36 23% Foodgrain availability is assumed at 0.75% increase since there will not be any drastic increase in land availability or the yields Consumption increase is taken at 2.5% year on year which is its historical rate of increase Considering the above factors it seems that we are heading towards a deficit in overall foodgrain availability in next 3 to 4 years.
  11. 11. Domestic demand,supply & stocks since 1960 -foodgrains 250 35% 230 Green 30% 210 Revolution 25% 190 20% 170 15% 150 ^ 10% 130 110 5% P ro duc t io n 90 C o ns um pt io n 0% 70 S t o c k t o us e -5% 50 -10% Source: USDA upto 2007, company estimate thereafter Foodgrains include wheat, rice,barley,corn,millets and sorghumIndia’s consumption in most of the years has been equal to or more than the production. If the yield does not improve, India will head for deficit in 3 to 4 years
  12. 12. Domestic demand,supply & stocks since 1960– Milled Rice Rice, Milled 2005 2006 2007 2008 2009 2010E Million Tonnes Opening Stock 11 9 11 11 14 18 Production 83 92 93 97 99 78 Imports - 0 - 1 - - Availability 94 100 104 109 113 96 Consumption 81 85 87 90 94 97 Exports 5 5 6 5 2 Closing Stock 9 11 11 14 18 (1) ^10 0 3 5% Gre e n 90 3 0 % R e v o lu t io n 2 5% 80 2 0 % 70 15 % 60 10 % 50 P r o d u c t io n 5% C o n s u m p t io n 40 0 % S to c k to u s e 30 -5% Source: USDA upto 2007, company estimate thereafter Source: USDA upto 2007. Production for 2010 assumed 20% lower and consumption at historic growth rate of 3%Government will increase MSP to augment production causing even more distortions
  13. 13. Domestic demand,supply & stocks since 1960– WheatWheat 2005 2006 2007 2008 2009 E 2010 E Million TonnesOpening Stock 4 2 5 6 8 11Production 69 69 76 79 81 64Imports 0 7 2 0 -Availability 73 78 82 84 88 76Consumption 70 73 76 76 77 77Exports 1 0 0 0 0 ^Closing Stock 2 5 6 8 11 (1)100 45% P r o d u c t io n 40% 90 Green C o n s u m p tio n Revolution 35% 80 S to c k to u s e 30% 70 25% 60 20% 50 15% 40 10% 30 5% 20 0% 10 -5%Source: USDA upto 2007. Production for 2010 assumed 20% lower and consumption at same levels India will have lowest inventory of wheat
  14. 14. Low cane supply caused by massive crop switching… (million tonnes) SY 02 SY 03 SY 04 SY 05 SY 06 SY 07 SY 08 SY 09 SY 10E SY 11EOpening Stock (A) 10.7 11.3 11.6 8.5 4.0 * 3.6 9.2 8.1 2.3 0.0Production (B) 18.5 20.1 14.0 12.7 19.3 28.3 26.3 14.7 14.0 21.0Total Availability (A+B) 29.2 31.5 25.6 21.2 23.3 32.0 35.6 22.8 16.3 21.0Demand – Total 17.9 19.9 17.5 18.5 19.6 22.7 27.5 22.5 23.4 24.6- Domestic 16.8 18.4 17.3 18.5 18.5 21.0 22.5 22.5 23.4 24.6- Export 1.1 1.5 0.2 0.0 1.1 1.7 5.0 0.0 0.0 0.0Imports 0.0 0.0 0.4 2.1 0.0 0.0 0.0 2.0 0.0 0.0Closing stock 11.3 11.6 8.5 4.8 3.6 9.2 8.1 2.3 (7.1) (3.6)Closing stock-Month 7.6 7.0 5.8 3.1 2.2 4.9 3.5 1.2 (3.6) (1.7) Stock -to- use Ratio (%) 63.3 58.4 48.5 26.1 18.5 40.6 29.5 10.2 (30.3) (14.5) Source: Indian Sugar Mills Association (ISMA) – October 2008, Company estimates * Adjustment made as per Central Excise Certificate Massive crop switching caused by inordinately high induced MSP for Wheat
  15. 15. Volatility in Sugar Cycle increasing… 10.00 8.00 6.00 Absolute Difference in Sugar Production Year on YearMillion Tones 4.00 2.00 Difference in production - 62 64 66 68 70 72 76 78 82 84 88 90 94 96 00 02 06 08 74 80 86 92 98 04 10 19 19 20 20 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 (2.00) Year (4.00) (6.00) (8.00) (10.00) (12.00) High induced MSP for alternate crops induces more volatility in sugar cycles
  16. 16. … leading to sugar crisis and recovery will take muchlonger as demand grows even more Typical Sugar Cycle (5-7 Years) Lower Higher & Lower Increase in Increase in Higher Decline in Delayed sugar prompt Lower sugarcane sugar area under sugar sugar payments production payment to profitability production prices cultivation production prices to farmers farmers 2-3 years up cycleBHL Prices* ^(Rs./Qtl) 40.0 1,196 1,163 1,195 1,311 1,363 1,388 1,385 1,338 1,178 1,420 1,692 1,795 1,425 1,485 2,068 30.0 64% 63% 60% 58% 58% 20.0 46% 48% 49% 45%Million tonnes 41% 10.0 38% 26% 30% 19% 0.0 SY95 SY96 SY97 SY98 SY99 SY00 SY01 SY02 SY03 SY04 SY05 SY06 SY07 SY08 SY09 SY10 SY11 (10.0) 10% Unprecedented (20.0) inventory levels -15% -30% (30.0) Inventory (as a % of Consumption) Production Consumption* BHL free sugar prices^ 9MSY09 actual realization for BHL Source: Indian Sugar Mills Association (ISMA) – October 2008, Company estimates This can and will happen to other crops then what?.........
  17. 17. Wheat & rice or sugarcane ?? ECONOMICS OF SUGARCANE VERSUS RICE-WHEAT Year 2009 MSP Revenue/ Yield/Acre Cost of culva- Rates/Qtl. Acre Profit/Acre Av.Profit / Crop (Qtls.) tion/Acre (Rs) (Rs.) (Rs.) (Rs.) Annum/Acre Sugarcane (Plant) 225 20405 140 31500 11095 Sugarcane (Ratoon) 200 13190 140 28000 14810 12953 Wheat 20 11010 1080 21600 10590 Paddy 24 11280 900 21600 10320 20910 Year 2010 MSP Revenue/ Yield/Acre Cost of culva- Rates/Qtl. Acre Profit/Acre Av.Profit / Crop (Qtls.) tion/Acre (Rs) (Rs.) (Rs.) (Rs.) Annum/Acre Sugarcane (Plant) 225 20405 180 40500 20095 Sugarcane (Ratoon) 200 13190 180 36000 22810 21453 Wheat 20 11010 1080 21600 10590 Paddy 24 11280 980 23520 12240 22830 -One Wheat and one paddy crop can be done during the year -Wheat- Nov to April and Paddy – July to September -For Sugarcane, state advised price (SAP) as per Uttar Pradesh state government is considered. SAP 2010 is assumed Source: Company Irrational MSP without economic fundamentals will cause severe distortions
  18. 18. Future ??? India sorely needs The 2nd Green Revolution
  19. 19. Thank You

×