US Perspective - 12.06.12
12/06/2012
www.themaxfieldreport.com
It does not appears as if packers were successful in liquidating the largest slaughter of the year last week. Sources report that packers did see a fair amount of interest in steer hides; however, with the vast majority of interest below $90 delivered and packers reluctant to accept prices under this level, packers passed the vast majority of bids.
There were interesting reports from more than one source that it appears packers softened their stance late in the week and it is widely noted that packers were willing sellers on HTS at $83 and BS at $82 (FOB), while we understand that some packers were successful in moving HBH at levels of $75.50-$76 delivered.
We did have a few isolated reports of trading shared with us from the long three-day weekend (we were closed Friday due to business travel) as we have a couple of sales on regular weight packer BS ranging from $82 to as high as $83, while we also had Jumbo BS reflecting levels of $85. Other trading is quoting HNH at $71 and HBH at $70, while the only other trade was a sale on HTS at $83.
Meanwhile, reports from Chinese domestic tanners are saying that they are now experiencing a noticeable decrease in orders for the second half of 2012. According to sources, the decrease in business is rumoured to be anywhere from 10%-20% depending on the tanner and if correct this would easily outpace the decrease we have seen in slaughter that is running at close to 5% for the year.
Reports from members of the cowhide trade claim prices were firm last week and in spite of attempts from tanners to bid prices lower, sellers were successful in holding prices steady, if not incrementally higher, at least on plump cows. However, a couple of situations worth watching are reports that the Midwest part of the US has been experiencing much drier conditions than normal over the last four to six weeks, coming close to drought conditions. There are also a number of unsold cows in Europe and with summer holidays quickly approaching in Europe popular opinion is that sellers will want to liquidate these hides in the coming weeks.
We were able to round up a few isolated reports of trading as we have a couple of processor sales with BS checking in at $79 and HTS at $80.
Looking ahead to this week, it will be interesting to see if sellers have sold enough product in order to hold prices steady, especially in light of the largest slaughter of the year last week, and popular opinion in the trade that the next two or three weeks are likely to see numbers close to last week’s. In the meantime, we tend to suspect that sellers would welcome a steady or softer market, as this would enable them to continue to have letters of credit opened on older, more expensive material as we are hearing a few tanners are moving a bit more slowly in opening letters of credit.
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