US Perspective - 28.10.14
Courtesy of The Maxfield Report
Last week in the big packer trade, big packers started the week continuing their efforts to hold prices steady, resulting in asking prices as well as the number of hides offered to not be much different from the week prior. As the week moved forward, tanners continued to test the will of those selling hides with ideas that were roughly $2-$3 under asking prices.
For the most part, sources were reporting that many sellers were countering lower ideas with counters that were running roughly a dollar under their official asking prices. Popular opinion of the trade was that trading was decent; however, most members of the trade were leaning towards opinions that sales were not quite as busy as the week prior.
The interesting development late Thursday was announcements by a couple of the packers that they were withdrawing their offers, citing huge increases in prices paid for live cattle (rumoured to be $6 per hundredweight higher). The day after (Friday), many packers were sharing with customers of intentions to reduce slaughter levels considerably, as box prices were not keeping pace with prices paid for live cattle and margins were drifting deeply negative.
As to trading levels last week, it almost appears as if HNS / BBS have their own market and most sellers able to reflect prices steady with the week prior. Sources report trading levels on HNS at $114 FOB ($120-$121 delivered), while BBS sold at $113-$113.50 ($119-$120 delivered). Elsewhere, HTS, BS, CBS and heifers drifted lower.
Sources claim HTS traded in a range of $108.50-$109.50 FB ($116-$117 delivered), while BS traded in a range of $107-$109 FOB ($114-$116 delivered) depending on native content. Reports claim that CBS sold in a range of $103-$104 FOB ($109-$110 delivered), while sales on heifers had HNH at $96 FOB and HBH at $93.
In regards to the cowhide trade, sellers started with last week with offer lists that appeared as populated as the past few weeks, while there was speculation that some producers had more hides for sale than they are willing to admit.
As far as asking prices, some sellers begrudgingly lowered their ideas last week, recognising efforts to hold prices steady and counter sellers willing to bid, resulting in ask / bid spread several dollars apart. Overall, the majority of sources we spoke with last week shared that interest fell short of expectations and likely not as many hides sold as week prior, even though sellers appear willing to negotiate prices.
In regards to trading levels, HNDC exchanged hands at $85-$86 FOB ($91-$92 delivered), while sales on HNC reflect levels as low as $72 FOB ($79 delivered) in limited volumes. Sources report HBC also a struggle to sell with sales at $63 FOB ($69 delivered) and unconfirmed reports of sales at lower than this.
THE LOOK AHEAD
As to what we expect for this week, as it pertains to big packer hides, we would suspect packers who withdrew their offers towards the end of last week, citing substantial increases in live cattle prices, likely have little choice but to continue. We recognise that this is to encourage a reduction in slaughter numbers; however, as we have shared the last two reports, even if slaughter numbers are reduced by 30,000 head on a weekly basis, slaughter barely is equal to demand and it is unlikely those with unsold inventories are able to liquidate their unsold material.
In the meantime, the cow slaughter is slowly inching its way higher and last week’s slaughter is almost 7% higher than levels saw last month that were some of the lowest levels of the year. This is not good news for most producers who appear as if they have more than ample unsold inventories of many different selections. We suspect we could see asking prices lowered again this week and it will be interesting if it will be enough to induce buyers to purchase at substantial volumes.
