Strong monsoon promises relief for Indian agri producers

After years of drought, a good monsoon could bolster the agri sector, where investors are already finding opportunities in midstream business.

India’s battered agriculture sector could see a recovery from two years of drought if forecasts of a heavy monsoon season come true.

The India Meteorological Department has predicted a 94 percent chance of rain falling at “normal to above normal” levels across the country.

With high global supplies in staple food commodities, Indian agri producers have been hit with low prices as their own production capabilities have tightened. Mandala Capital general partner Uday Garg said in March drought conditions were affecting some of Mandala’s portfolio companies because of working value or inventory issues.

As conditions for Indian growers deteriorated, a national budget allocated 359.8 billion rupees ($5.4 billion; €4.8 billion) in direct funding to the agriculture sector, including provisions for irrigation improvements and financial assistance to farmers.

But despite adverse growing conditions, Garg and other asset managers have told Agri Investor opportunities along the agri value-chain have been strengthened by a growing population and increasingly wealthy consumer base.

SEAF India Investment Advisors, Abraaj and Omnivore Partners have been among those saying midstream companies in India can mitigate the challenges of a fragmented supply chain. They have found successful investments in processing and retail opportunities, marketable water management and solar water pumping solutions and new seed varieties.

The government has said it wants to double incomes for Indian farmers in the next five years. A major part of this effort involves improving the country’s irrigation infrastructure to protect against drought conditions and bring new land under cultivation. It also allocated 4.12 billion rupees of funds to organic farming, an area which is seeing some cautious investor interest on the back of market demand and some improvements in fresh food supply chains.