US Perspective—12.04.16
12/04/2016
www.themaxfieldreport.com
Various members of the big packer trade are of the opinion that the market exhibited signs of losing some momentum last week, in spite of concerted efforts by packers to hold prices steady. By the end of the week it was becoming apparent that only sellers willing to negotiate prices were meeting with success when attempting to sell hides. Sales were not robust last week and it’s highly unlikely that packers were able to liquidate their slaughter.
Sources report that the vast majority of buyers started the week with ideas running roughly $2-$3 lower than the official asking prices of packers. In the meantime, we are aware of some instances of buyers with substantially lower ideas that were in turn deemed too aggressive by sellers.
Overall, the consensus is that most selections traded a dollar lower than in the previous week, while there were a couple of selections (heifers) that appear as if they were sold at levels a couple of dollars less than the week before.
Worth noting, we had a couple of sales reported today that were concluded over the weekend, as we have sales of regular weight HTS reflecting levels of $65.50, while there were rumblings of sales as low as $65; the only other sale is a trade on HBH at $55.
In the meantime, reports from members of the cowhide trade are calling interest last week relatively uneventful as it appears that sellers struggled to find enough interest. Unfortunately for producers the vast majority of buyers interested in buying hides had ideas $2-$3 lower than the asking prices of sellers and considering most sellers started the week with price ideas $1-$2 lower than the week prior, it is unlikely that producers liquidated their production.
Members of the cowhide trade continue to face a number of problems from tanners in the Hebei area. Several sources shared stories about delayed letters of credit openings, requests for renegotiations of outstanding orders and, unfortunately, we have even heard a few isolated reports of cancellations, forcing sellers to re-sell hides that were either in transit or sitting at Chinese ports.
As it pertains to sales, we have a couple of sales, carrying over from the weekend as we have processors laying claims to selling HTS at $61, while trading on HNDC reflect levels of $53.50, with sellers obtaining prices on a delivered basis finding it difficult to push prices into the 60s.
We continue to lean with other pundits that packers have slowly seen their sold-forward position erode on several selections. That said, we would not be surprised to see packers a bit more amenable to negotiating prices this week especially on selections that are not quite as well sold as some of their more popular selections. In the meantime, last week’s harvest was 31,000 head higher than a year ago and considering that this time last year was some of the lowest slaughter levels of 2015, we look for this trend to continue especially as the weather is slowly improving across the US and the barbecue season moves into full swing.
There continue to be plenty of questions regarding demand or the lack of demand. In the meantime, a number of pundits are of the opinion that demand is unlikely to improve substantially anytime in the near future. We remain in a demand-driven market and if we were a seller, we would continue selling into the market.
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