US Perspective—27.05.14
27/05/2014
www.themaxfieldreport.com
Reports from various sources claim interest slowed considerably towards the end of last week and by lunchtime on Friday afternoon, many members of the US trade were talking about leaving their offices early in order to observe the long holiday weekend. In the meantime, it appears the consensus of the trade is that packers were successful in stemming the downward momentum in prices. In fact, we are aware of trading in the second half of the week at levels a dollar higher than levels accepted earlier in the week.
Overall, popular opinion in the trade is that sales volumes this week were decent, leading to thoughts that it is likely that packers cleared their slaughter this week. However, more importantly, the impression of the trade is that packers were successful in liquidating their unsold inventories of heifers, attributed to reports that efforts to buy additional quantities at their lowest trading levels were refused by packers.
Reports overseas claim there were tanners who refused to recognise the firmer tone of the market and were still bidding HTS at levels of $107-$108 delivered, to no avail. There were also tanners with interest in BS at the end of the week a dollar under HTS, but they found packers to have no interest. In the meantime, there are reports of packers selling HTS this week at $109-$110 delivered, while we are aware of trading on BBS reflecting levels of $106,and a sale of CBS at $100.
In the meantime, we hear from other sources that many sellers had more than ample bids this week; however, a considerable amount of the interest was not concluded due to buyers’ ideas being too aggressive. What will be interesting to see is if any of this interest reappears this coming week.
We suspect producers will make their best effort to convince the trade that the market has bottomed. We look for sellers to be pointing to the holiday-shortened slaughter next week and slaughter levels in June that are projected to average close to 30,000- 40,0000 head below normal levels for that time of year, that prices are likely to return to their previous levels.
The wild card as we see it is live cattle prices. Packers were successful in pushing live cattle prices a couple of dollars lower and with box prices actually moving higher this week, the week will end with packers’ margins moving out of red ink to levels close to $30 per head. That said, it is no secret that packers usually tend to push slaughter numbers when they make money and historically May – August are the prime operating time for packers.
We are of the opinion that June slaughter numbers will be higher than many pundits are anticipating. Our opinion is that weekly average slaughter numbers in June will be running closer to 625,000 head and this will certainly test the market, especially as we move closer to summer holidays in Europe.
If we were selling hides, we would consider taking advantage of the current trading plateau to sell a few more, while securing letters of credit openings on our older, more expensive contracts, as opposed to trying to push prices higher.
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