US perspective – 16.04.13
17/04/2013
www.themaxfieldreport.com
Prices of big packer hides drifted higher again last week, in what appears to be limited volumes traded. Popular opinion of the trade is that although there was no real shortage of interest last week to buy hides, it appears that packers were unable to sell enough hides at these higher prices in order to liquidate their productions.
According to sources, prices on HNS last week reached as high as $104 (FOB), while trading levels on HTS / BBS were recorded as high as $102 (FOB). In regards to prices on a delivered basis, we heard that ideas on HNS reached as high as $111-$112, while ideas on HTS / BBS were mainly at $109, with a few buyers willing to pay as much as $110 delivered.
Members of the cowhide trade report a mixed bag of trading last week, as we understand that there was continued decent interest on HNDC, which is good news for producers as the number of HNDC in the slaughter mix is running well above seasonal levels for this time of year. Meanwhile, interest on HBC and HNC was not nearly as brisk; however, with fewer of these selections in the product mix it did not pose any real problems for sellers last week.
Something worth keeping an eye on moving forward is that the number of cows coming to slaughter has been running well above levels of a year ago since the early part of March, to a point that year-to-date we have seen about a day and a half worth of slaughter more than a year ago. Although this has not had any negative impact in sellers’ ability to keep prices firm, we would tend to suspect many did not plan for numbers to be higher versus levels of a year ago.
THE LOOK AHEAD
Looking ahead to what we expect this week, it is difficult to anticipate we will see much of a change than what we have seen the past several weeks. However, it is worth mentioning that we are hearing whispers from members of the trade whose opinion we respect that are starting to question if perhaps prices are coming close to running their course, especially considering the wide range of resistance to prices we have seen the past couple of weeks.
That said, bulls would insist that this indicates that there is still a substantial open to buy not yet covered and with sellers enjoying comfortable sold-forward positions and slaughter levels barely exceeding levels of 600,000 head, there really is no pressure on sellers to have to negotiate prices.
That said, we look for limited offers again this week for the most part, while it will be interest to see if sellers will be able to obtain additional increases again this week, while we tend to suspect those looking for any correction in prices (although coming sometime in the near future) are likely to be disappointed again this week.
Monday’s estimated cattle slaughter checks in at 122,000 head. This compares to 116,000 head last week and 112,000 head the same day last year. For the record, the four-year running average slaughter for this week is 634,000 head. However, considering that packers watched their margins slip further into the red last week in spite of buying cattle cheaper, it is doubtful we will see the slaughter reach such levels and we will start our weekly guess at 612,000 head.
Meanwhile, last week’s cow / bull slaughter check in at 139,000. This is a 4,000 head improvement versus the week prior, while it is 25,000 head higher than the same week last year. Year-to-date, the cow / bull slaughter stands at 2,005,000 head and this is 44,000 head or 2.24% better than the pace we set a year ago.
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