US Perspective - 25.04.17
25/04/2017
www.themaxfieldreport.com
Last week in the big packer trade, packers appeared to begrudgingly resign themselves to the fact that if they were going to trade any substantial volume of hides, they were going to have to be willing to negotiate prices and trade at lower levels. Overall, it appears that packers made a concerted effort to hold trading levels to within $1-$2 of their trading levels from the previous week. Popular opinion among pundits is that packers likely enjoyed their busiest week of trading for two or three weeks.
Sources report that several packers were able to conclude some direct business with tanners. Trading levels reported included sales of HTS ranging from $72 to $74, while sales of BBS ranged from $76 to $77. Trading of CBS ranged from $69 to $70.
Sales of wet blue hides were a bit more difficult to detect. Sources continue to report more than ample offers and that a number of sellers remain aggressive. Overall, most members of the trade believe packers likely enjoyed their best week of sales for three or four weeks. Opinions seem to be divided, however, on whether packers were able to liquidate their weekly production last week.
There were a few isolated trades on HTS carrying over the weekend. There are reports of packer regular weight material changing hands at levels ranging from $67 to $68. There were rumours that a few packers quietly traded as low as $66 towards the end of last week, while processors reported being able to sell HTS at $64 this past weekend.
Members of the cowhide trade report that they did not see nearly as much interest last week as their big packer counterparts. The few sources that were fortunate enough to have bids last week say that interested buyers continue to take dead aim at aggressively lower prices. Overall, the popular opinion is that trading levels last week were $1-$2 lower, while the consensus is that producers struggled to generate enough sales to clear their weekly production. This is leading to thoughts that a number of producers have more than ample unsold inventories; several pundits are looking for offer lists this week to have a full complement of sections for sale. It is also likely we will see some selections for sale for prompt shipment.
This week, we are looking for slaughter levels to inch their way past the 600,000-head level. Once packers are able to “break” the live cattle market (as popular opinion is that there are plenty of cattle standing), it is likely we will see the number increase considerably. The profitability of packers will improve substantially when this happens.
In the meantime, we continue to feel that producers are undersold as we have seen roughly 1.7 million more hides produced than have been sold. That being said, previous comments pointed to the fact that this excess was predominantly wet blue sales. With sales of wet-salted hides falling well short of 400,000 hides on a consistent basis, we tend to argue that there are also numerous selections of unsold wet-salted hides.
We remain of the opinion that the market is in transition. The good news for those selling hides is that although we tend to always talk about the lack of sales, when there is a lack of sales, there is also a lack of buying. In our comments on last week’s export sales, we illustrated that China has shipped half a million more wet-salted hides than it has bought. We believe there are a number of tanners that have raw stock inventories below normal levels for this time of year due to a lack of buying.
For now, we remain of the opinion that we are in a buyer’s market. With so many producers not possessing strong sold forward positions, we would encourage those selling hides to continue selling into this market as it likely that your first sale will be your best sale in the interim.
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