Equity Analysis /

Thailand:Agro & Food - Sustained weak Chinese pork price but uptick seen in 2H22

  • China’s hog and pork production to rise modestly in 2022

  • Long-term positive from govt’s interim capacity management plan

  • CTI still incurs net loss at this pork price level in 1H22

Bualuang Securities
29 April 2022

Given the USDA’s forecasts of Chinese hog and pork production rising modestly YoY in 2022 and the current net loss incurred for the Chinese pork unit (against the production cost of large-scale Chinese pork operators which is estimated at CNY16-18/kg), we expect CTI, or CPF’s Chinese pork unit, to continue to incur net loss through 1H22 before the pork price improvement expected in 2H22 from the lifting of COVID-19 lockdowns. Our TRADING BUY on CPF stands, premised on CTI’s improved operations in 2H22.

China’s hog and pork production to rise modestly in 2022

Based on its Livestock and Poultry: World Markets and Trade report on Apr 8 and its GAIN (Global Agricultural Information Network) report titled China: Livestock and Products Semi-Annual on Mar 4, USDA projected that China’s pork output will reach 51m tonnes in 2022, up 7% YoY, due to higher hog output and sow stocks, bigger slaughter levels and more efficient sow population controls. Large-scale Chinese pork operators are unlikely to expand production massively in 2022 given that low pork prices and high feed costs threaten their profit margins.