US Perspective—15.11.11
15/11/2011
www.themaxfieldreport.com
Popular opinion in the trade is that last week was not a particularly busy week of trading for US packers and generally agreed it is unlikely packers liquidated their slaughter last week in spite of the significantly reduced slaughter at only 625,000 head. With regard to prices, packers made a strong effort to hold prices unchanged from their previous levels. However, by the end of the week, they had no choice but to succumb to lower ideas of buyers on some more difficult to sell selections and we call prices last week down roughly a half of a dollar.
We received mixed reports of trading last week from members of the cowhide trade. Some sources shared they enjoyed quite a bit of interest from buyers with the vast majority of buyers looking to buy cheaper, while others reported a very uneventful week of trading. For the most part, we are not convinced there were enough hides sold last week in order to allow producers to stem the decline in prices, especially in light of the fact that we are in the midst of the fall cow run. In the meantime, prices last week were reported as steady-to-lower.
The US Department of Agriculture’s November crop report lowered the estimate of the 2011 corn crop yield by 1.4 bushels to 146.7 bushels per acre. USDA is now estimating the 2011 corn crop at 12.31 billion bushels, down 123 million bushels from their October figure. To account for the smaller crop, they reduced their forecast of feed usage and ending stocks but left their price forecast unchanged at $6.20 to $7.20 per bushel.
Meanwhile, USDA also reduced its forecast of 2012 meat production. The USDA is now forecasting next year’s beef production will be down 5% from this year, broilers down 1.7%, turkey up 0.7%, and pork production up 1.7%. Total red meat and poultry production in 2012 is expected to be down 1.6%. Given a growing population and strong export demand, the outlook is for high prices in the meat case and strong livestock prices.
As to what we expect to happen this week, we look for packers to try to hold prices steady. We expect packers to try to utilise the significant reduction we saw in the nation’s slaughter last week as a reason to motivate buyers who did not cover all of their needs last week.
In the meantime, it appears packers were able to sell the majority of their prompt shipment selections last week and this too should assist packers in holding prices somewhat steady this week, while a smaller slaughter this week and next week due to the Thanksgiving Holiday will also assist with this effort.
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