US Perspective - 29.07.14
29/07/2014
www.themaxfieldreport.com
The consensus in the big packer trade is that the market did not exhibit any of its usual summer doldrums last week and, in fact, with slaughter levels at historically low levels and traders looking to buy hides and tanners appearing as if they were short-bought, packers were able to record their largest single-week increases of the year.
Packers likely sold at least a week’s worth of wet-salted production, if not slightly more, while there are still plenty of questions if those producing wet blue hides sold enough hides last week. As far as prices are concerned, sales of HNS were as high as $117 delivered ($110 FOB), while BBS sold at levels of $116 delivered ($109 FOB). Meanwhile, sales on HTS ranged last week from $112-$114.50 delivered ($104-$107.50); however, worth noting, the range is attributed to weight average of the product sold. Elsewhere, BS sold at levels of $114.50 delivered ($107.50), while CBS sold at levels of $112 delivered ($105 FOB). In the meantime, it appears sales on heifers met with mixed results last week. Sources share that they were able to improve upon their last traded levels for sales of HNH at levels as high as $92 FOB; however, it is believed that sales on HBH remain difficult to come by, resulting in sales at levels as low as $85 FOB.
Sentiment in the trade is that producers of wet blue continued to fail to liquidate their weekly production and it’s likely we will see sales of wet blue hides this Thursday less than the 200,000 hides we are producing on a weekly basis. Elsewhere, members of the cowhide trade report that they did not have as successful a week of sales as big packers. We did hear reports from several sources claiming that decent interest on HNDC continued last week and this allowed producers to push prices back up to levels hovering around $90 FOB. However, we heard from numerous sources that interest on HBC and HNC remained lacklustre for the most part.
The good news for producers is that the number of cows in the slaughter mix continues to run at levels close to 20% below those of a year ago and it is believed that a combination of a firm big packer market, coupled with unseasonably low slaughter numbers, is preventing producers from chasing lower ideas.
As to what we expect for this week, we look for packers to continue offering only a limited number of hides, while we would not be surprised to see higher asking prices on the hides offered. Early speculation by some pundits is that asking prices could be as much as $1-$3 higher than last week. We look for offers on cowhides to be in line with last week’s and we would not be surprised if sellers do not try to leverage the firm big packer market and unseasonably low slaughter levels against buyers.
The entire beef industry is facing a difficult time. As of this writing, prices of live cattle, hides, box beef and offal are close to or exceeding their all-time record levels, with some segments of the industry setting new record levels nearly every day. As record after record is broken, a step back from the day-to-day or week-to-week might be useful in order to understand the significance and impact of this monumental movement in prices.
In our opinion the main driving force was confirmed by the July Cattle Inventory Report that confirmed cattle numbers at a 60-year low (previous reports were not available due to the government sequester). This is leading to an increasing number in the trade to harbour the opinion that high prices are here to stay and could very likely even move higher, as we have heard from numerous sources who think hide prices could very well test the record levels we saw earlier this year.
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