For your information, current raw material prices (in the last week of December 2012) are still steady at a range of 3.50-3.60 Baht/kg, but it will reach 4.00 Baht/ kg in the 1st Quarter of next year due to a decrease of raw material supplies during that period.
However, there may be one external factor to push raw material prices lower than 4.00 Baht/kg – if demand from both EU and USA markets won’t be strong in the first Quarter of 2013. If this occurs, packers may start to reduce their production capacity to around 10-20% from normal (8,000 Metric Tons/day) in order to avoid building huge unsold stocks in their warehouses. This may come from not only less demand but also uninstructed shipments.
By the way, our purchasing team forecasts that raw material supply will be less in the beginning of next summers’ crop which will drive raw material prices to be well over 4.00 Baht/kg.
Also as discussed previously, the El-Nino affected in Southeast Asia and Pacific regions since July-August of 2012. This is another external factor that all packers have concern over and are preparing for otherwise they, including us, will face violent shortages of raw material in the supply chain at that period.
