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Companies operating in the agriculture sector are expected to report a soft quarterly performance in the third quarter of FY26 due to a seasonal let-down, highlighted a report by Nuvama.
The report said that companies with exposure to the domestic agriculture market are likely to post muted results in Q3FY26, despite positive underlying indicators such as healthy reservoir levels and favourable trends in Rabi sowing. It stated "Soft quarter due to seasonal let-down. Companies exposed to the domestic agriculture are likely to report a muted quarter" According to Nuvama, the quarter is expected to remain weak mainly due to seasonal factors affecting demand and sales volumes. The report noted agrochemical companies are anticipated to record a decline in volumes, largely due to excess rainfall during August 2025 and September 2025. The heavy rains led to missed spraying cycles of agrochemicals, which in turn resulted in sales returns and higher channel stock. While agricultural fundamentals such as soil moisture content and reservoir levels remain supportive, these factors are unlikely to translate into immediate volume growth for agrochemical companies during the quarter. The report highlighted that higher levels of channel inventory in the Indian trade are expected to weigh on volume growth in Q3FY26. Nuvama estimated that the industry will witness a negative to flattish volume performance during the quarter. This is despite strong progress in Rabi sowing, which has been reporting broad-based growth across crops. The report pointed out that all major crops have recorded higher acreage during the Rabi season. Oilseeds stood out with the strongest growth in acreage, rising by 3.2 per cent. However, it cautioned that the benefits of higher acreage and favourable sowing conditions may be realised only in subsequent quarters. The report further explained that excess rainfall in August and September disrupted normal crop protection practices, particularly spraying schedules for agrochemicals. This disruption reduced near-term demand and contributed to inventory build-up at the distributor and retailer levels. The report added that the current quarter is also marked by efforts from companies to correct channel inventory levels, which is expected to limit fresh dispatches and weigh on revenue growth. Overall, the report said that while the medium-term outlook for the agriculture sector remains supported by good sowing trends and healthy moisture conditions, Q3FY26 is likely to remain a challenging quarter for agri-input companies due to seasonal factors, excess inventory, and the impact of unseasonal rainfall. (ANI)
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