US Perspective - 15.05.12
15/05/2012
www.themaxfieldreport.com
The sentiment of members in the big packer trade was that last week was a much slower week of trading than the past few weeks. Worth noting is that although sales for the week may have appeared lacklustre, the consensus of the trade was that packers were able to eke out some incremental increases in steer hides last week on the limited volume traded.
Trading levels last week on popular steer hides (HTS and BBS) reached as high as $92.50-$93, while trading levels on BS reached as high as $92 on limited volumes. Meanwhile, sources share that offers of heifer hides were more than abundant last week and it is speculated that a couple of packers were aggressively looking for volume-type business. There were reports of sellers looking for levels as high as $78 for HBH; however, it appears the vast majority of buyers’ ideas were closer to $77 delivered.
Although there were a few very isolated reports of heifers bringing some decent levels last week, it is widely agreed that if a buyer has money, the ability to take prompt delivery and is willing to consider volume, they have an excellent chance of negotiating prices. Reports from members of the cowhide trade claim that it appears there is pressure building on cowhides and especially HNDC. Last week was a very sluggish week of sales for most and even though slaughter levels since the end of the first quarter are down nearly 60,000 head versus levels of a year ago, it is widely speculated many sellers have seen their sold-forward positions eroded somewhat.
Early opinion of pundits in the big packer market is that there is a very good chance we have seen prices peak, at least for the moment. Slaughter levels are likely to creep into the 650,000 head level this week. We tend to suspect when packers were calculating their sold-forward positions a few weeks ago, it is hard to imagine they had inclinations we would be at these levels, especially with some of the packers informing some of their customers that slaughter levels in June and July would be hard-pressed to exceed 620,000 head.
The increase in slaughter levels, primarily on fat-cattle as cow numbers have been running much lower than levels of a year ago the past six weeks, will no doubt test the self-proclaimed sold-forward position of packers. We are well aware of some packers laying claims to being sold into the month of July; however, we tend to suspect the rise in slaughter numbers and tanners’ strong resistance to pay even steady levels last week is an indication it is very likely there is a modest correction in prices looming on the horizon.
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