Agricultural Products – MSP for rabi crops hiked by 15-30% :: RBS

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Indian cabinet today approved a significant hike of 15-30% in MSP of winter crops. We believe
this will help maintain or improve margin for most crops, which in turn will be positive for the agriinput
sector.


MSP of rabi crops significantly rises
􀀟 Cabinet declared a 15% rise in base MSP of wheat to farmers at Rs12,850 per tonne and
over 25% rise in base MSP of most of the non foodgrains such as barley, gram, sunflower,
masur etc.
􀀟 Current MSP rise for wheat and non foodgrains is far higher than their MSP CAGR for period
2008-09 to 2011-12, which was in the range of 2-11%
We believe this will help sustain or improve crop margin
􀀟 Hike in base MSP of wheat is in line with demand for 15% rise by farmers and lower than
MSP of Rs13,500 per tonne, recommended by Commission for Agriculture Costs and Prices.
􀀟 We note rise in MSP was considered to cover the rising farm input cost, encourage farmers to
increase acreage and reduce import bill as government aims to achieve self sufficiency in non
foodgrains, which we also discussed in our report published on 13 Oct.


We expect agri-input demand to remain strong
􀀟 We believe higher margins are sustainable and expect robust growth in agri-input demand.
􀀟 Our top picks are Rallis India, United Phosphorus and we maintain our buy rating on
Coromandel International and Tata Chemicals.