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November price update: Livestock spread poorer
Agri-Food
Livestock: Prices slipping for domestic swine and broilers in November. Swine
price went down by 3% MoM from Bt68/kg to Bt66/kg. Broiler price also went down by
5% MoM from Bt42 to Bt40. Our monitor of feed raw material prices (corn, soybean
meal and fishmeal) indicates there will be no positive effect on spread and earnings in
1Q15, lining up with our earlier warning of lower spread and poorer outlook in 1Q15
after peak in 4Q14.
Corn price in November was Bt9.1/kg, up 11%MoM, and 24% from the January low.
Prices are 10% less QoQ, clouding 1Q15 outlook for livestock producers.
Soybean meal price in November was Bt19.6/kg, stable MoM and 4% lower YTD.
Fish meal price in November surged 30% MoM to Bt38.7/kg but shrimp feed price
rose more strongly at 35% MoM to Bt41.50/kg, a good indication of greater
demand and thus a turnaround in the shrimp farm business. CPF gains most of all
players if the shrimp supply chain turns around as a seller of both shrimp and feed.
Swine price in November was Bt66/kg, slipping 3%MoM. It is important to now
monitor livestock supply – both swine and broiler.
Broiler price in November was down 5% MoM to Bt40/kg from Bt42/kg,
continuing the MoM decline. However, exports continue good in 4Q14, shoring up
broiler production volume and price. We expect CPF and GFPT to continue to show
solid profit through 4Q14 but urge caution for 1Q15. Broiler spread is expected to
slim to Bt9.0/kg in 4Q14 from Bt12.5/kg in 3Q14.
Shrimp price stable MoM. Shrimp price was Bt195/kg in November, stable MoM,
indicating higher domestic supply — a positive. Another positive is the surge in shrimp
feed price, confirming our expectation that the shrimp industry is coming back to life
after the EMS disaster.
Continued low tuna price. In November, tuna prices stayed low at US$1,200/ton for
the second month upon a continued good harvest in the West Pacific. This will confirm
that lower prices widen margin on its branded tuna (75% of TUF’s tuna business).
BUY CPF. TUF reached our target price of Bt92/share. Since food exports will close the
high season at year’s end, we leave our target price unchanged but suggest investors
take profit and lower our recommendation to Neutral. For GFPT we also recommend
taking profit at our target price of Bt20. We are concerned about its outlook in 2015,
which we expect to be poorer than 2014. Our pick for the month is CPF, which has 50%
upside from our target price of Bt42. We also have high hopes its shrimp business will
turn the corner in 2015. Each rise of 1% in net profit will add Bt4bn or Bt0.5/share to
CPF. We anticipate shrimp breakeven in mid-2015 for CPF.
