US Perspective—26.04.16
26/04/2016
www.themaxfieldreport.com
Big packers have continued their efforts to convey a firm tone to the market, countering the lower ideas of traders with full asking prices and, in some cases, prices higher than their original asking price. In the meantime, a number of sources continue to accuse some of the packers of offering hides directly to tanners at levels lower than their official asking prices. There are a number of unconfirmed rumours swirling, insisting that some sales concluded last week were at least a couple of dollars lower than the self-proclaimed trading levels of packers.
Elsewhere, the big news in the trade is that slaughter levels are on the rise and last week’s 585,000 head slaughter is the largest of the year. Worth noting, slaughter levels the last two weeks have exceeded levels of a year ago by 30,000 head and pundits are looking for this to continue as packers’ margins have moved back into the black. We join the opinion of other pundits: we could see the slaughter challenge the 600,000 head level this week, something we have not seen since the end of June 2014.
With regard to trading levels last week, as mentioned above, for the most part prices were steady to incrementally lower last week. Meanwhile, in regards to the number of hides exchanging hands, a number of sources shared they struggled to obtain bids last week, leading to thoughts that it is highly unlikely that packers cleared their production. Meanwhile reports from the cowhide trade claim that last week was an uneventful week of trading. Overall, sources report that the majority of producers appeared as if they were anxious to concluded business; and “looking” to conclude business at prices $1-$2 lower than their last established trading levels. In the meantime, sources share only a handful of buyers expressed interest in buying last week and unfortunately, they are recognising the underlying pressure in the market place, while the vast majority of producers appeared reluctant to follow the aggressive ideas of the few buyers willing to share their ideas.
With slaughter levels on the rise and the fact that sales the past few weeks have been far from stellar, we tend to suspect that we will see offer lists much more populated for many producers than in the last couple of weeks.
Popular opinion is that the market is on the verge of a correction and in the minds of many members of the trade it is not a matter of if, but when. Meanwhile, we are starting to hear a few more reports of some of the packers pushing customers to take earlier delivery than contracted on some of their less popular selections, which in our opinion is another indication that the sold-forward position of some packers is dwindling. We look for this week to be a difficult week of trading for sellers as the May Day Holiday is looming this weekend. According to sources, many tanneries will close on Wednesday and not re-open until early next week. In our opinion, this will likely only provide tanners with yet another excuse to remain out of the market, (considering business is lower than a year ago, most tanners do not need any reason to refrain from buying). We could be in for a long week.
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