Day-old-chicken was capped at IDR3,200/head - Daily Pack 23 April 2014

Ministry of Trade reportedly has set-up day-old-chicken (DOC) capped price at IDR3,200 per head. It is said that the price will be reviewed on monthly basis. (Starbrain Indonesia, Detik com, Pinsar)

Comment: This new policy is to protect chicken growers. On our channel check, DOC price is now ranging between IDR3,500-4,000/head with average selling price of IDR3,750/head. In some areas where supply are limited, DOC price could reach IDR6,000/head. Based on Pinsar, in January – September 2013, DOC price ranged between around IDR4,000/head to IDR7,000/head in which it cyclically high near to the month of Ramadan. The government capped DOC selling price is slightly lower with major DOC producers’ production costs. For example, Malindo Feedmill (MAIN IJ, BUY, TP: IDR3,800) said their production costs is IDR3,400/head. We see that this policy may reduce DOC supply because of it is not attractive low selling price. At the end, it would affect the government decision when setting-up monthly DOC price. Sales of DOCs represent 15% of Charoen Pokphand  (CPIN IJ, NEUTRAL, TP: IDR3,700)'s total revenue and 20% of MAIN’s. Hence, the direct impact of this new regulation is quite significant on an annualized basis. (Andrey Wijaya)

FROM TRADING DESK: JCI today is expected to be traded at 4,909.25 and 4,957.52

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Best regards,

RHB OSK Indonesia Research Institute

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