US Perspective—07.03.17
07/03/2017
www.themaxfieldreport.com
Last week saw packers continue their efforts to convey a firm tone to the market and trading levels for the most part reflected fully steady levels, while there were a few isolated incidents where packers were able to squeeze short-bought tanners or traders who were short, forcing them to pay slightly higher levels on very limited quantities.
The sizeable majority of hides changing hands last week sold at no worse than steady levels. However, the consensus among the members of the trade we spoke with is it is unlikely that packers were able to liquidate a full week’s worth of production, leading to further speculation that many packer have more than a few selections that are not sold nearly as far forward as they were four or five weeks ago.
Producers of wet blue continue to push for volume business, but to no avail, and by looking at the weekly USDA Export Sales Report, it appears producers have sold their weekly production twice over the course of the first two months of 2017. This is leading to speculation that it is rather likely that many wet blue producers travelling in Asia prior to the start of the APLF exhibition (March 29-31) could have some very “special” offers for opportunistic buyers in the next couple of weeks.
Elsewhere, reports from members of the cowhide trade continue to call the cowhide market firm, as it appears a combination of producers armed with decent sold-forward positions and continued decent demand from China (primarily northern upholstery tanners), are allowing producers to trade at fully steady to incrementally higher levels.
Overall, most sources call interest last week modest, with popular opinion that limited offers from producers are to blame. Sources share that there was a decent number of buyers attempting to buy towards the second half of last week; however, with most buyers looking to pay levels of a couple of weeks ago and sellers unwilling to negotiate on price, only a limited amount of business was concluded.
As to our initial thoughts for this week, we suspect packers will opt to keep their offer lists unchanged. However, we did hear some rumblings of packers who were informing buyers that they were looking for slightly higher trading levels on a couple of selections late last week and we are not sure if this was packers jockeying for position, or packers suspecting the interested buyers were short of product.
In the meantime, as it pertains to cowhides, we would not be shocked if some producers did not at least try to attempt to raise their asking prices on the heels of continued decent interest on most cowhide selections.
What we find particularly intriguing is that in spite of decent interest in cowhides over the past several weeks, those selling lower grades, small packers, render hides, or machine-damaged number-threes, are not having as much success. In fact, there are rumblings of some producers trading these items last week at slightly lower prices in order to keep supplies moving.
This could be a lacklustre week of trading: we will start to see members of the trade depart this weekend for Asia in order to visit customers prior to the APLF event. Producers are likely to monitor their sales this week to ensure that if they should see a sudden rush of interest, they do not oversell their positions.
Elsewhere, as we have been saying for the last few weeks, keep an eye on slaughter levels. Over the course of the past couple of weeks, packers have seen some appreciable increases in box beef prices, while keeping live cattle costs in check. This has allowed packers to register some incremental profits, or at least come close to breaking even, as warmer temperatures are looming, coupled with packers seeing better-than-expected beef demand. That is why we are leaning towards thoughts that we will see slaughter number slowly inch their way back towards the 600,000 head level, which would be roughly 10%-11% higher than levels seen last year and why if we were a producer, would continue selling into the market.
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