Poultry
Government Steps in to Support LB prices
- To support the soft livebird prices, Kementan has instructed slaughterhouses not to purchase below the reference price.
- Price recovery might take some time, unless accompanied by stricter production control. ST feed production might be at risk.
- Maintain OW on still favorable supply-demand dynamic amid depressed valuation of 4.2x (-1.4SD to 5-year average).
Government’s eyes on the soft livebird prices
The Ministry of Agriculture (Kementan) has stepped in after live bird (LB) prices declined significantly below the government's reference price of Rp19,500/kg, reportedly reaching around Rp15,000/kg in several regions. To support independent farmers, Kementan has instructed slaughterhouses (RPHU) not to purchase below the reference price, coordinated with industry associations, and temporarily suspended recommendations for certain poultry business activities until market conditions improve. The move comes amid industry concerns over weak LB prices caused by a combination of excess supply and soft consumer demand.
Signal of price stabilization effort but risk in feed production
We view the news as incrementally positive for the poultry sector, as it signals stronger government commitment to stabilizing chicken prices and protecting farmer profitability. Historically, periods of severe price weakness have often been followed by additional supply-control measures such as GPS import restrictions, DOC setting reductions, or parent stock culling, which would be more meaningful for industry profitability. However, if the temporary suspension of new poultry business related approvals expands to feed raw material imports, it could backfire into higher costs or feed supply disruption in the worst case.
Short-term outlook remains challenging
The news also highlights that industry fundamentals remain challenging in the near term. LB prices’ fall to around Rp15,000/kg suggests oversupply is more severe than previously anticipated, while comments from industry participants indicate that demand remains relatively soft. Moreover, the current measures do not directly remove excess supply from the market, meaning price recovery may take time unless accompanied by stricter production controls.
Limited impact to supply-demand balance, maintain Overweight
Overall, we see the development as supportive for listed poultry players, although sustained earnings recovery will ultimately depend on the speed of LB price normalization and the effectiveness of future supply-management policies. The sector currently trades at 4.2x (-1.4SD to 5-year avg.), which we think already reflects current soft LB prices. We maintain Overweight as we continue to see a favorable poultry supply-demand in FY26F with CPIN as our top pick given its less crowded position. Tactical 3M rating: N; we see limited catalysts in the near term amid still elevated feed cost, weak LB prices, and Suro month seasonality in mid-June. Risks to our view are persistently high logistic costs, Rupiah depreciation, and spike in inflation.
… Read More 20260605 Poultry
