Expected downtrend of raw milk powder prices will enhance profit margins of Vietnam dairy companies
- Global prices of raw milk powder went down since Mar-2022 because of 1) easing of global grain prices (e.g., corn) and 2) lower demand from China due to the lockdown policy. According to JACOBY, the 2022 situtation that saw global raw milk production deficit and record-breaking Chinese dairy demand will no longer replay in 2023.
- For 2023, we expect that global raw milk powder prices will continue moving on a downward trend for three main reasons: 1) higher supply and lower demand from China; 2) fertile global raw milk production; and 3) expected downward trend of global grain costs.
- Expected decline in input costs in 2023 will help the gross margin of Vietnam dairy producers to recover. Notably, we did a regression test and find out that when WMP fluctuates between the range of USD/tonne 2,500-3,000, VNM will have a gross margin between 45% and 47%, which is strongly higher than their Q3 2022 margin of 39%.
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