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Thailand (Bualuang): Agro & Food - Add KSL and drop GFPT from our sectoral picks

  • Bearish on “livestock meat” sub-sector in 2Q21 through 2H21
  • YoY 3Q21 core profit drop expected for CPF, TU and TFG
  • Bullish on “soft commodities”; Add KSL to our sectoral picks

We downgraded our Agro & Food sector from “OVERWEIGHT” to “NEUTRAL” in light of dimmed expectations for Thai and regional pork prices in 2Q21 through 2H21 while adding KSL and dropping GFPT from our sectoral picks. We are bearish on “livestock meat” sub-sector (pork in particular) due to the rising regional pork supply and bullish on “soft commodities” instead led by tight supply and stocks related to drought caused by La Niña and its revival in 4Q21 through 1Q22. Now TVO and KSL are our sectoral picks. Despite their recent global price retreat related to the macro factors, soybean and sugar fundamentals remain solid in 2021. 

Bearish on “livestock meat” sub-sector in 2Q21 through 2H21

We saw China’s live pig price tumble by 50% in five months (from CNY36.7/kg as of Jan 1 to CNY18.3/kg as of May 27), driven by the sudden jump in actual hog inventories and pork production in China. The number of Chinese large-scale pork farms has risen by 13% (from 160k to 180k farms) since early-2020 to now. Moreover, Vietnam’s mean live pig price fell 9% in two months (from VND74,833/kg as of Apr 1 to VND68,500/kg as of May 27) while Thailand’s provincial live pig price started to drop 15% in the second half of May (from Bt80/kg as of May 10 to Bt68/kg as of May 27) and live pig price in Bangkok began to retreat 7% in May (from Bt82/kg as of May 4 to Bt76/kg as of May 27).


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