Equity Analysis /
Thailand

Thailand: Agro & Food - Livestock: Strong bounce in Chinese pork price

  • Bounce in Chinese pork price in late-Jun through Jul

  • Modest rise in Vietnamese pork price in late-Jun through Jul

  • Further rise in Thai chicken price; sustained high Thai pork price

Bualuang Securities
7 July 2022

The faster-than-expected Chinese pork price recovery in late-Jun through Jul will benefit CPF, as CTI, its Chinese pork unit, is likely to rebound in 2H22. Despite the slight increase of Vietnamese pork price so far, we expect a heftier rise in 2H22, led by improved meat demand. The sustained high Thai pork price and a further rise in Thai chicken price upon the reopening for tourism in May-Jun and consumption switch from pork to chicken will fatten Thai livestock margins in 2H22. We reiterate our TRADING BUYs on GFPT, TFG and CPF, fueled by robust livestock profits foreseen in 2H22. 

Bounce in Chinese pork price in late-Jun through Jul

We’ve seen the Chinese pork price leap robustly 47% within one month, from its recent low of CNY15.8/kg on Jun 10 to CNY23.2/kg on Jul 5, 2022. It stood at CNY22.8/kg on Jul 6. We attribute the sudden spike of Chinese pork price during Jun-Jul to the eased COVID-19 restrictions in some provinces (such as Beijing and Shanghai) starting Jun 2022 after  two months of lockdowns to comply with the “zero COVID-19” policy. We regard the recent price spike in late-Jun through Jul as faster and higher than our previous expectations of CNY20/kg in 2H22. We have now lifted our forecast for 2H22 from CNY20/kg to CNY23/kg. With the YTD mean of CNY14.5/kg and the expected 2H22 price of CNY23/kg, we expect the 2022 mean of CNY19/kg, down 5% YoY. Given CTI (CPF’s China pork unit)’s cost of production of CNY16/kg, we estimate that it will turn around from 1H22 loss to 2H22 profit due to higher price and bigger gains from biological assets. The 2Q22 mean price of CNY15.4/kg was near CTI’s pork production cost of CNY16/kg.