Equity Analysis /

Thai Vegetable Oil PCL: Global SB price hits 8-year high—US weather woes

  • The 8-year high of global SB price—US drought after deep freeze

  • Cold wave followed by heat wave; widespread US drought

  • Surprisingly lower-than-estimated US SB planting areas in 2021/22

Bualuang Securities
6 May 2021

Given the recent eight-year high of global soybean (SB) price on the concerns over the US drought, the expected tightening of 2021/22 US SB stocks and the surge in SB demand from China, we think that TVO’s current share price is too low while its valuation deserves a future upgrade. Our TRADING BUY stands, based on its 2021 profit jump and a high dividend yield.

The 8-year high of global SB price—US drought after deep freeze

The global SB price hit its 8-year high of US$15.47/bushel on May 5, up 12% from its recent low of $13.85/bushel on Apr 12. We attribute this recent price bounce to: 1) short-term supply concerns over the cold snap across much of the US, meaning potentially lower yield prospects for 2021, and the unexpected dryness in the heart of the Corn Belt (or 13 Midwestern states producing corn and SB) and 2) huge demand from China which is hoarding all US and South American SB supply to boost its domestic hog production leading to expected tighter US and global SB stocks or even a shortage situation for 2021/22.