Agribusiness Sector

Agribusiness Sector (AGRI-FOOD)

 

- US keeps Thailand on Tier 3 of TIP report  

The US has kept Thailand on Tier 3 ranking in its 2015 Trafficking in Persons (TIP) report. According to the report, Tier 3 ranking means countries whose governments do not fully comply with the Trafficking Victims Protection Act (TVPA)’s minimum standards and are not making significant efforts to do so. 

- Negative in short term but with limited effect on sector’s profit  

Although this issue is bad for the image of the fishery industry in Thailand, it will have a very limited effect on earnings of agri-food companies. CPF’s shrimp export at present is around B7bn a year or only 1.5% of its total income in 2015, while TUF’s seafood export to the US and Europe is around B28bn a year or 16.3% of its total income in 2015. However, these two companies have not lost its customers after the downgrade from Tier 2 Watch List (Thai government did not fully comply with the TVPA’s minimum standards but was making significant efforts to do so) to Tier 3 in the middle of 2014 and they have had good relationship with their customers. Nevertheless, this may aggravate the image of Thai fishery industry in the eye of the EU after it had already issued a yellow card to Thailand over illegal unreported and unregulated fishing (IUU). At present, the Thai government has been putting serious efforts in solving such a problem before the given deadline at the end of October 2015. If the government fails to do so, it can get a red card and will be banned from exporting fishery products to Europe. Yet, CPF and TUF’s shrimps come from local farms and TUF’s tuna comes from foreign vessels, so they would not be affected by the red card. 

- CPF is good choice in long run  

We maintain a profit forecast for the sector. Although this issue has negative sentiment on CPF and TUF in the short term, in the long term we still recommend buying CPF(FV@B26) and holding TUF([email protected]).