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In June to date and 2Q24TD, swine prices in Vietnam and China have risen further to reach several-year highs on tighter supply. In June to date, local swine prices have edged down MoM from less impact from lower supply as the weather cooled and broiler prices are flat MoM but are still at a 2024 high in 2Q24TD. Feed costs in 2Q24TD have been staying at the 2024 low. In 2Q24TD, spot skipjack tuna price has been edging up QoQ but moving average price over the past 3-6 months is still lower YoY, implying higher OEM product price (spot price) amid lower raw material cost (lagging spot price) for the tuna business in 2Q24F. Our top picks are CPF and TU.
Overseas swine prices up to several-year high in 2Q24TD. Swine prices in Vietnam have jumped to a 3-year high to above VND69,000/kg in June to date (+16% YoY, +6% MoM) and VND64,511/kg in 2Q24TD (+18% YoY, +21% QoQ), pushed up by lower supply on the spread of a new round of ASF in late 2023. Swine price in China has risen to a two-year high of CNY18/kg in June to date (+28% YoY, +18% MoM) and CNY16/kg in 2Q24TD (+14% YoY, +12% QoQ), on supply adjustment after prices fell to stay below breakeven for the past few years. Spot prices are now above breakeven at the gross profit level of VND45,000/kg and CNY16.5/kg for big players in Vietnam and China. Product prices in 2024 are expected to improve YoY on better supply management.
Local livestock prices reaching this year’s high in 2Q24TD. Local swine price has edged down MoM to Bt68/kg in June to date (-10% YoY, -5% MoM as cooler weather kept supply up) but is staying at the 2024 high of Bt69.5/kg in 2Q24TD (-12% YoY, +5% QoQ from better supply management upon the return of ASF disease in some areas in Thailand in early 2024 and less smuggled pork as the government engages in stricter inspections). Prices are above Bt62-68/kg, the breakeven point at the gross profit level for big players. We expect local swine price to rise HoH in 2H24F from less smuggled pork and the supply reduction arranged by the Pig Board of Thailand in March-June, that will gradually have an effect for six months. Local broiler price was Bt44/kg in June to date (-2% YoY, flat MoM) and at 2024’s high of Bt44/kg in 2Q24TD (+3% YoY, +8% QoQ, with solid broiler export value growth of 18% YoY in April). Prices are above the Bt38-39/kg breakeven at gross profit level for big players. We expect solid export demand together with better local swine price to support local broiler price in 2H24F.
Spot skipjack tuna price edging up QoQ in 2Q24TD. In 5M2024, spot skipjack tuna price fell 23% YoY to US$1,371/ton (vs US$1,784/ton in 2023). In 2Q24TD, spot skipjack tuna price has edged up 7% QoQ on lower catches to US$1,428/ton. This will be positive for its OEM tuna selling prices under short term contracts. Branded tuna selling prices under long-term contracts are expected to be stable or down in the low single digits YoY in 2024F. We expect TU’s margin for the ambient unit to widen on better OEM prices amid lower tuna raw material costs (5-month inventory on average).
Top picks. We keep our 3-month tactical rating as Outperform for all players, reflecting our positive view on sector earnings in 2Q24F, with growth YoY and QoQ from better sales and margin. CPF is our lead pick with the sector’s best 2Q24F growth, turning around from losses in 2Q23 from rising overseas swine prices and local livestock prices and benefit from divesting loss-making businesses in 2H23. TU is another pick as the sector laggard, with 2Q24F looking better from a wider ambient margin. The continuation of the share repurchase until June 30 will protect TU’s share price from downside.
Key risks: Weak product prices from fragile purchasing power and more supply, higher feed costs and interest rates. Key ESG risks are energy, waste & water management (E), product quality management, health & safety policies (S).
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