US Perspective—21.06.16
21/06/2016
www.themaxfieldreport.com
Last week in the fat cattle hide trade, packers took the opportunity to increase asking prices, buoyed by confidence by the strong interest they have seen this past month. Most packers published offer lists containing all the selections they produce, as it appears packers recognise that lucrative margins will likely result in slaughter numbers over 600,000 head as they look to maintain their sold-forward positions. They appear to be in possession of their strongest sold-forward position in months and none of the packers appears as if they have any tolerance for buyers looking for bargains below their last reported trading levels. Buyers found that packers appeared focused on selling hides at levels a $1-$2 higher than the week prior.
As to the number of hides changing hands last week, when checking with various members of the trade, we encountered a handful of sources sharing that they sold more hides last week than the week prior. Several other members of the trade stated that they did not have as successful a week of sales. We tend to believe that sellers came close to selling a week’s worth of production last week.
Members of the cowhide trade claim that interest on cowhide is better than roughly a month ago; however, it is not as strong as the interest in big packer hides. Buyers are making their best attempt to resist paying more money, but are meeting a lot of resistance from sellers when trying to pay steady levels. Although some producers concluded a handful of sales at more money last week, the majority of sources report that producers are not achieving the same price increases as their big-packer counterparts and sold-forward positions are not nearly as strong. In the meantime, as to the number of hides sold last week, most pundits are of the opinion it was a decent week of sales and if sales fell short of production, they likely were only a bit short.
As to our initial thoughts for this week, we fully expect that packers will look to increase asking prices again; there are simply too many people looking for product. It will be interesting to see the reaction of buyers, as tanners in Asia and especially Chinese tanners have been aggressively chasing the market these past few weeks; many appear under-bought.
Slaughter levels have reached their highest levels of the year and early guesses are that we are likely to see this trend continue for the next several weeks, especially with live cattle prices under pressure and packers looking at some of their largest margins of the year. This will mean those selling hides will need to continue selling into the market, while trying to push trading levels higher. The other variable worth monitoring is that the second half of June and July are known as “slow times” for many tanners, while summer holidays in Europe are just around the corner. Historically, we tend to see demand dip during this time and will have to see if we see a similar pattern this year. For now, the market remains in the firm hands of those selling hides.
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