US perspective - 26.11.13
26/11/2013
Courtesy of The Maxfield Report
www.themaxfieldreport.com
We have encountered a myriad of opinions last week regarding the big packer market, as we have heard from some pundits who are pontificating that the market has plateaued, while others are insisting that they enjoyed a surprisingly decent amount of interest last week and able to conclude a fair amount of business.
What we found interesting was the fact that there were a few more offers of regular weight steer hides, primarily by packers. We are not sure to read this as packers are finally catching up on their outstanding sales on regular weight steer hides, or if packers are starting to see a change in the cattle coming to slaughter, as tightening supplies are resulting in more lighter weight cattle in the slaughter mix.
As far as trading levels last week, we saw sales of both BBS and HNS over $110 delivered, as we are aware of sales on BBS at $111-$112 delivered and HNS as high as $113 delivered. Meanwhile, sources share there was more than adequate interest on buying regular weight HTS at levels of $105-$107 delivered; however, most offering this selection were looking for something closer to $108 and higher.
Also worth noting, it appeared there were a few more offers of Jumbo and Super-Jumbo steers last week, coupled with reports it appeared there were a few sellers pressing a bit harder for sales on this selection. These selections have become a bit more attractive to tanners over the course of the past several weeks, especially with prices paid for drop splits running at all-time record levels. Overall, opinions appear mixed as to if packers were able to liquidate their slaughter last week and it will be interesting to see the results of this week’s USDA Export Report.
Members of the cowhide trade report that sales last week were a bit more sluggish than the past couple of weeks. Meanwhile, the number of cows in the slaughter mix the last few months are running 10% under levels of a year ago, and although sales were lacklustre, producers did not have many cows for sale last week.
Overall, sources call trading levels last week unchanged with levels of the past couple of weeks. The consensus of the trade is it is unlikely that producers sold a week’s worth of production last week; however, the sentiment of the trade is that the vast majority of producers remain well sold and likely sold through the remainder of the calendar year if not longer.
THE LOOK AHEAD
As to what we look for this week, we are somewhat surprised at the fact that producers collectively as a group did not opt to offer today, considering the holiday on Thursday [Thanksgiving in the US], which a good share of the trade will likely use for a four-day weekend this week. In the meantime, we do not expect any real change in offering lists of producers.
Overall, the vast majority appear as if they are well sold and with slaughter levels shortened significantly this week due to the holiday and expectation levels in December will be significantly reduced due to poor margins for packers, it is likely sellers will continue to be patient waiting for buyers who they perceive as short-bought to enter the market.
In the meantime, a fair number of Chinese tanners have been delaying buying decisions as illustrated by the USDA Export Sales Report the past couple of weeks. Meanwhile, tanners have continued to take delivery of their outstanding hides in China and in the 4Q alone, Chinese tanners have drawn down their outstanding sales of wet-salted hides by 400,000 hides.
Meanwhile, as we are moving closer to the end of the calendar year, we will soon encounter logistical challenges associated with the upcoming Chinese New Year (CNY). This year, the holiday falls on January 31; however, we are already hearing reports that some Chinese tanners are insisting that they will not take delivery of hides starting January 10 all the way through February 10.
As we have mentioned in earlier reports there were a number of Chinese tanners insisting that they would be taking additional time off for the holiday in an effort to try and stretch hide inventories as well as attempting to place some pressure on sellers to reduce hide prices. However, we tend to suspect a month long shutdown from accepting hides seems a bit too severe, at least for the moment.
That said, the best guess is that hides destined for China will need to be loaded no later than December 20 for Midwest plants if they are to arrive in time to be unloaded before the CNY. This makes for a bit of a challenge for sellers over the course of the next couple of weeks, as popular opinion is that most are sold forward at least for the next 4-5 weeks and unlikely we will see much trading.
However, on the other side of the coin, those sellers who traditionally sell only 3-4 weeks ahead are likely to find themselves in a bit of a conundrum the next few weeks as finding buyers will to ship from December 20 – the middle of January might be a bit of a difficult task.
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