US perspective – 11.06.13
11/06/2013
www.themaxfieldreport.com
Looking back over the course of the past week, packers were successful squeezing short-bought buyers for more money. Sources share many of the packers were rather proud of the fact that they were able to advance steer prices back to levels of $100 and higher. However, as to exactly how many hides ex-changed hands at these levels is not clear, as the majority of the trade appears to be of the opinion sales were limited.
According to sources, Chinese tanners led the charge last week with the vast majority of the interest primarily on regular weight steer hides, as we are told that interest on jumbos and heifers was not nearly as brisk as the best ideas for heifers appeared to be hanging around the $90 delivered mark. Meanwhile, trading levels for steers reflected levels as high as $107-$108 for BBS, $105-$106 for HTS, $108-$109 for HNS and $105-$105.50 for BS.
Meanwhile, interest out of Korea last week was lacklustre for the most part with most Korean tanners appearing as if they continue to fight the market, especially on steers. This has led to reports of some larger tanners supposedly informing suppliers that they could not open any more L/C’s this month, while there continues to be reports of slower-than-expected L/C openings by other tanners.
Reports from the cowhide trade report a difficult week of business and popular opinion of the trade is that last week was a sluggish week of trading especially compared to the week prior. From our vantage point, it appears producers’ higher ideas last week sent most buyers to the sidelines, as popular opinion on the buy side is that larger-than-expected slaughter levels the past two to three months has some producers not as well sold forward as they have been advertising.
Last week saw trading levels of $80-$81 FOB for HNDC, while sales of HNC reflected levels of $74-$75. Other trading saw prices of HBC at $62 in the north and $60 in the south, while bull prices stayed steady with NB at $82 and BB at $75.
The look ahead
This week, we will see China celebrate their Dragon Boat holiday on Wednesday. When speaking with sources today, most commented that they did not have much interest from China to start the week and given the fact that sellers in general continue to try to convey a firm tone to the market, we may see most Chinese remain on the sidelines until late this week.
In the meantime, we fully expect packers to come out this week with offer lists no worse than steady with last week’s offers, while it will certainly be interesting to see how populated offer lists are, especially with popular opinion that packers likely did not liquidate a week’s worth of production last week.
What will be interesting is to see if this week’s USDA export report finally reflects a decent week of sales for packers. Last week, we heard early in the week that last Thursday’s report would reflect a strong week of sales. However, when the report was released and sales fell below the slaughter for the sixth consecutive week, sellers were quick to point out that many of the sales from the week prior took place later in the week and would be reflected on this week’s reports.
Meanwhile, slaughter levels are not exhibiting any signs of backing off and this, coupled with speculation that we will see another export report this week with sales under the slaughter, is likely to lead buyers to start to questions the sold-forward positions of packers. In the meantime, should all this come to fruition, we would tend to think that by week’s end it is very likely we could start to see some of the packers starting to second-guess themselves as to if there is enough demand in order to justify higher prices.
The slaughter
Monday’s estimated slaughter comes in at 124,000 head. This is identical to the same day last week, while it is 5,000 head lower than the same day last year. Worth noting, the four-year running average slaughter for this week is 670,000 head; however, we doubt we will see anything close to this. Rather, considering that packers saw live prices slip lower this week to match the declines in box prices we will start our guess this week at 645,000 head.
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