March, April and May are crucial months for preparation of the kharif season, which produces the largest quantity of foodgrains in the country. There is a fear in the market that the coronavirus pandemic has put a spanner in those preparations, especially for the seeds and agri-chemicals sectors. Senior agriculture consultant and thought-leader Jagadeesh Sunkad believes that if the lockdown is lifted by early May, there still would be enough time to prepare for the kharif season. Since the agriculture sector has already been exempted from the lockdown, the impact will not be devastating.
However, Sunkad, who has consulted for multi-lateral institution Asian Development Bank and Murugappa Group, believes that due to the pandemic, agricultural input and output supply chains, which are traditionally dominated by wealthy rural families, would get distributed. In the medium term of the next three to five seasons, their roles will diminish and new start-ups will serve the foodgrain value chain and input supply chain.
So, what are the ways in which the seeds, fertilizers and agri-chemicals businesses could be affected by the pandemic? Will farmers face any shortage of seeds and others agri-chemicals?
From the farmers’ perspective, seeds and fertilizers are credit-driven investments. Therefore, access to credit is vital. Formal institutional credit accounts for a significant percentage of this sector’s activities.
However, it is still lower than informal credit sources. Thus, this (the pandemic and its aftermath) is an opportunity for the central and state governments to support farmers in innovative ways and strengthen formal credit. On the other hand, the trader community could face a credit crunch, which could lead to cautious supply of goods in the market.
The traders could face turbulent times, making them hesitate in giving out loans and goods on credit to farmers. As the kharif sowing takes place in a staggered manner across the country, there will be no shortage of chemicals or seeds. The seeds and chemicals industries have enough time to prepare for the kharif season.
So, what could be the short-, medium- and long-term impact of the lockdown on agriculture?
Input and output supply chains of agricultural goods have already been damaged. The old models of supply have outlived their utility. New and novel approaches will be born during these difficult times. These will be among the first sets of innovations to be seen. Agricultural income never provided a cushion for errors. Therefore, in the short term, it will be extremely painful for the small and marginal farmers. With every failure, farmers take two more seasons to recover. In the short term, lack of credit to obtain farm inputs and logistics chaos will hit the farmers very hard. The pain will reduce only in the medium term and long term.
The pandemic will erode rural monetary wealth. The vacuum will be filled by new forms of organised capital. In the medium term, supply chains will get support from institutions and start-ups.