US Perspective - 5.8.14
Courtesy of The Maxfield Report
Members of the big packer trade agree last week was a lacklustre week of trading. The consensus is that buyers for the most part were inactive, as they attempted to digest the current firm trend of the market. Overall, the majority of the trade is of the opinion that only a limited number of sales were concluded last week, while they also appear in agreement that the hides that were sold were traded at no less than full asking prices.
As to trading levels, we know of sales on HNS as high as $118 delivered, while BBS sold in a range of $115-$116, depending on the origin and weight average. Meanwhile, interest on HTS reflected levels equal to last week, with sales at $114 delivered, while sales on BS also were reported at this level. Other trading claimed packers could sell CBS as high as $112 delivered, while it still appears as if there is some clouded information regarding the prices of HBH, as we had sources sharing they sold product at $92 delivered; however, we heard from others who insisted that they would not accept bids at such low levels.
In the meantime, reports from the cowhide trade appear a bit encrypted last week in our opinion. We heard from a number of sources that they did not have many bids to address and the few bids they had from buyers were slightly lower than the last reported trading levels. Meanwhile, we spoke with a handful of others who laid claims to seeing a surprising amount of unsolicited bids and on some selections that they had not offered in a few weeks.
Overall, we think the trade would agree that it was not an especially busy week of trading with most sources concurring the business concluded was far from easy, while as far as prices are concerned, we would say that prices for the most part were unchanged with the week prior.
THE LOOK AHEAD
As to what we expect for this week, we really do not see much of a change from the past two to three weeks, especially with Europe still on holiday and Korean tanners on holiday this week. Meanwhile, slaughter levels will remain close to 575,000 head and this is certainly not going to force the hand of packers to succumb to the ideas of buyers looking to buy below the last established traded levels. In fact, we are of the opinion packers will be faced with a delicate balancing act moving forward.
Packers will certainly want to ensure they have hides to offer to their regular buyers and will need to be disciplined as to not oversell their position. Meanwhile, perhaps an even a larger challenge for packers will be to ensure they are asking enough money for their hides. We suspect as we move forward that the unseasonably low slaughter will force the hands of some tanners who are not regular buyers to chase the market and likely to create a considerable amount of chaos. This is why we remain of the opinion there is much more considerable upside in this market as opposed to downside.
In the meantime, we believe it is important to share some insight to cattle / slaughter numbers for the final five months of the year. What we find intriguing is that the weekly average slaughter for the month of July was a “robust” 558,000 head. Yes, 558,000 head. For the record, looking back to July 1, there were numerous pundits forecasting we would see smaller slaughter numbers in July. However, we were not aware of ANYONE in the entire beef trade forecasting a number THIS low.
