US Perspective —18.04.17
18/04/2017
www.themaxfieldreport.com
The consensus in the big packer trade is that last week was an uneventful one. Sources report that the number of bids fell well below expectations. On the bright side, popular opinion is that there were a few more bids to consider than in the previous week. Overall, the number of hides changing hands was disappointing. The majority of buyers had price ideas that were deemed much too aggressive for packers to accept. There is a good chance that packers passed on more business than they booked.
A number of buyers attempted to take “dead aim” at substantially lower prices; some ideas from buyers were running at levels $4 to $5-plus below the official asking prices of packers, with packers unwilling to counter. Sources report that some packers were countering bids $2-$3 under their asking prices. Trading appears to have settled at $1-$1.50 lower than the last reported trading levels. It is unlikely that packers liquidated their production last week.
Reports from the cowhide trade are almost identical to those from the big packer trade. Sources reported a relatively uneventful week of trading, although, as in the big packer trade, there were a few more bids compared to the previous week. The popular opinion among pundits was that the majority of bids were deemed too aggressive by producers and that there was more business passed on than hides sold.
Sources reported bids $3 and more below the asking prices of producers; it appeared that producers were trying to limit the drop in prices last week. It appears that a limited amount of business was concluded at levels fifty cents to a dollar under the last reported trading levels. It is unlikely that producers were able to sell a week’s worth of production.
For this week, it seems likely that several producers (both packers and processors) do not possess the solid forward positions they have been advertising. There could be some “special offers” this week for both wet blue and wet-salted hides. This is supported by data that shows US producers have produced 1.5 million more hides than they have sold since the start of 2017. This number includes wet-salted hides.
There are two other variables working against those selling hides. The busy season for most tanners has either passed or is quickly winding down. In addition, with the passing of the Easter holiday and the warmer temperatures in the Northern Hemisphere, there is likely to be further growth in demand for beef. With more than ample supplies of live cattle standing, it would not be a surprise to see slaughter levels move back up over 600,000 head on a consistent basis.
Producers have fought lower prices for too long. With many of them now carrying some unsold inventories of both wet-salted and wet blue hides, the current market means your first sale could very well be your best sale.
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