US Perspective—07.06.16
07/06/2016
www.themaxfieldreport.com
Last week in the big packer market things got off to a slower start, due to the public holiday for Memorial Day at the start of the week. Packers started the week with asking prices up by $1-$2 on most selections, while a number of packers continue to boast claims of possessing sales much further out than normal.
By the second half of the week, interest picked up considerably and the consensus is that packers had a successful week, with the majority of hides changing hands at packer’s full asking prices.
Sales of regular-weight packer HTS continue to inch their way higher, with trading reported in a range of $70-$71.50, while sales on BRS reflected levels of $68. Trading on BBS is reflecting a range of $72-$73.50 depending on the producer and weight average, while HNS sold in a range of $74-$75. Elsewhere, prices of CBS also pushed higher with trading at $62; we did not have any substantial change in trading levels on heifers.
Elsewhere, in the cowhide trade, we started hearing rumblings early in the week of interest on HBC and HNC increasing, and by the middle of the week we were hearing rumblings that many producers were refusing the lower ideas of buyers and adhering to their asking prices. Sources report a number of buyers immediately began to improve their ideas once learning of the resistance by sellers to their lower ideas, leading to thoughts that perhaps we have seen a bottom to the market.
In the meantime, the only selection still appearing as if it continues to lag is HNDC, as it appears there are still a number of producers not just from the US looking for sales.
With momentum on their side, packers enter this week buoyed with confidence. That said, the mentality of packers is to continue to test the market when momentum is on their side and we look for packers to test the waters again this week on higher prices.
In the meantime, the more intriguing market in our opinion is the cowhide market. Many pundits are insisting that cowhide prices bottomed last week and considering that they are roughly $30-per-hide cheaper than big packer hides, there may be much more upside to cowhide prices than big packer prices in the next couple of months.
A variable worth keeping an eye on is the nation’s slaughter. Recent Cattle on Feed Reports are indicating that there should be more than adequate supplies of live cattle In June and July. This, coupled with packers’ margins that are running in the black and the fact that historically live cattle prices peak in April, has many pundits looking for slaughter levels to exceed 600,000 head on a regular basis the next several weeks. Should this come to fruition, it is likely it will test the sold-forward positions of producers, as we suspect the majority of positions have been calculated using smaller slaughter numbers.
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