Meat producers forecast to see more positive results

Processing chilled meat at the Masan MEATLife Joint Stock Company under European standards. (Photo: VNA)

Analysts expect meat producers to record more positive business results in 2023 thanks to lower input costs and higher average live hog prices.

According to Ha Thu Hien, an analyst from VNDIRECT Securities Joint Stock Company, global agricultural product prices would maintain a downward trend in 2023 thanks to the increase in the supply of most food items.

In addition, Ukraine continues to return to supplying agricultural products to the world market.

Corn and soybean meal prices are forecast to decrease by 7.9% and 1.8% respectively in 2023. Therefore, VNDIRECT expects that feed costs will gradually decrease from the second quarter of 2023. Meat producers will record improved gross profit margin this year.

In addition, low feed costs will have a positive impact on smallholder farmers. However, in the long term, the farmers will be cautious in re-herding because they observe price fluctuations of live hogs in the market.

The farmers also do not have enough capital to immediately re-herd on a large scale because they have suffered losses for two consecutive years because of low hog prices.

The experts from VNDIRECT still believe that the supply will not be significantly affected next year.

An expert from Agribank Securities Joint Stock Company (Agriseco) also said that the price of input materials for animal feed production gradually cooled down. Besides that, a reduction in the animal feed tax was expected.

The Vietnam Animal Feed Association has recently proposed reducing the import tax on soybean meal from 2% to zero to support businesses.

Agriseco expects live hog prices to recover after bottoming out. The live hog price now is at 50,000 VND per kilo. It believes that hog prices may recover this year because the demand for food increases again when the tourism and service industries resume.

Hien from VNDIRECT said the domestic hog price had recovered after six consecutive months of decline. The volume of pigs sold off to the market due to the impact of African swine fever had gradually decreased. While concerns about oversupply had subsided as farmers stopped re-herding activities. The large livestock enterprises also had not yet planned to expand their pig herd.

In addition, supply from smallholder farmers dropped sharply after a long period of losses due to a sharp increase in feed prices while live hog prices remained low.

At present, there is no sign of a shortage of pork supply as in the first quarter of 2023, the total pig herd in the country still increased by 6.2% on year, equivalent to the period before African swine fever (ASF) and live hog production increased by 7.5% on year, according to the expert.

After the price drop in the first quarter of 2023, the domestic live hog prices started a slight increase from the beginning of April of 5.3% on month and 0.1% compared to the beginning of this year. But it was still below 3.5% on year.

The live hog price is expected to increase slightly in the second quarter of 2023 and will improve further in the third quarter of 2023 when the demand for pork recovers.

In the basic scenario, VNDIRECT believes that the live hog price will increase by 5% on year to 59,000 VND per kilo this whole year thanks to a recovery in China pork prices when this economy reopens.

However, the average production cost of the smallholder farmers now is about 55,000-60,000 VND per kilo of pork.

Therefore, VNDIRECT does not expect the farmers to re-herd strongly in the short term.

The Vietnam Livestock Association said that there were about 45-50% of large farms suspending production while 70-75% of mid and small farms and livestock households temporarily stopping re-herding. Because the input costs have surged while the selling price is low.

Despite the prospect of recovery, meat producers are hesitant to make plans to expand production, according to VNDIRECT.

The two leading enterprises in the livestock industry, the Dabaco Vietnam Group Joint Stock Company (stock code: DBC) and the Masan MEATLife Joint Stock Company (stock code: MML), have not yet announced specific expansion plans.

Most businesses believed that the meat industry faced difficulties in the first six months of 2023 due to weak demand.

This is also the reason why 3F companies developing feed - farm - food (3F) model postponed making production expansion plans, except for players that want to penetrate deeper into the domestic meat industry such as the BaF Vietnam Agriculture Joint Stock Company (stock code: BAF) and the Hoang Anh Gia Lai Joint Stock Company (stock code: HAG).

In 2023, the BaF Vietnam Agriculture Joint Stock Company plans to build three new farms including one in Bin Phuoc with a capacity of 6,250 breeding pigs and 30,000 meat pigs. Two others are in Nghe An with a total capacity of 5,000 breeding pigs and 90,000 meat pigs.

In addition, the company also targets to expand its distribution network through the Siba supermarket system and the Meat shop system.

Meanwhile, its new rival, the Hoang Anh Gia Lai Joint Stock Company, has also planned to build its own distribution system in 2022-2023.

However, at a recent shareholders meeting, Hoang Anh Gia Lai announced that it would increase franchised stores to 80% of its total stores instead of building its own branded stores due to insufficient capital.

According to VNDIRECT experts, the livestock enterprises still face risks such as prolonged tension between Russia and Ukraine affecting shipping activities in the Black Sea that could put pressure on global grain prices. African swine fever outbreaks could affect meat supply in 2023. Additionally, consumers tightening spending could lead to weaker-than-expected meat demand, including pork./.