Poultry
Indonesia domestic corn production is not in oversupply
- BPS calculated corn production at 14.8mn tons in FY23, lower than the demand of 16.3 mn tons in FY22 estimated by the MoA.
- Based on the estimated production, BPS predicts that corn prices were high during Jan-Feb but will be lower in Mar-Apr 2024.
- We maintain our sector rating at Neutral, with CPIN (Buy TP of Rp5,200) as our top pick.
New observations result in lower estimated corn production
In our recent call, the Central Statistics Agency (BPS) stated that it employs an integrated method for calculating corn production, which combines data from two collection systems: harvest area and productivity. The sample size for the corn production survey consists of 21,976 segments, totaling 87,860 observation points. Field observations are conducted during the last week of each month. The implementation of this new method has yielded a corn production estimate ranging from approximately 13 to 16 mn tons annually, notably lower than the previously reported figure of over 20 mn tons. We believe it is imperative for the government to incorporate this updated production data into its decision-making process.
Lower production in FY23 due to El Nino
In the past four years, corn production was at its highest in FY22, with a land area of 2.76 mn ha and dry corn (KA 14%) production of 16.5 mn tons, +23% yoy vs. FY21. Nonetheless, corn production in FY23 was down by 10.6% yoy due to a decline in the harvested area of 10.4% and slightly lower productivity of 5.97t/ha, both of which reflect the impact of El Nino.
Delayed harvests but higher production expected in early FY24
Corn harvesting area in 4M24 is estimated to increase to 0.96 mn ha (+10.4% vs. 4M23), with total estimated production of 5.34 mn tons (+10.3% vs. 4M23). The estimated 4M24 corn production is at a similar level to 4M22’s production before El Nino hit. The high corn prices in Jan-Feb24 reflect lower corn harvesting area due to the delay in corn planting caused by El Nino in FY23. This resulted in lower corn production in the Jan-Feb period compared to the last three years but higher production in the Mar-Apr period. As such, corn prices are expected to fall in Mar-Apr24, and a decline has already been evident since late February. Nonetheless, in Apr24, the production quantity is estimated to decline slightly to 1.76 mn tons (-23.1% mom), indicating that the corn price is expected to be slightly higher in Apr24 than in Mar24 though not as high as in Jan-Feb24.
Maintaining a Neutral view with CPIN as our top pick
Despite the attractive LT growth outlook, we continue to see ST negative sentiment (i.e., weak reported 4Q23 and 1Q24 earnings and potentially soft chicken prices post Lebaran without culling programs). Risks to our view include the resumption of the culling program and the possibility of the corn imports ban being lifted.
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