US Perspective - 08.08.17
08/08/2017
www.themaxfieldreport.com
Last week in the big packer trade, packers surprised the trade by lowering their asking prices at the start of the week. This action shocked most pundits as the majority of packers were telling prospective buyers towards the end of the previous week that they had sold enough and had no interest in selling additional quantities at the last established trading levels.
In addition to lowering asking prices, which allowed packers to align asking prices closer to their last traded levels, several of the packers appeared to have offer lists that were fairly well populated again last week. This surprised most pundits as the general perception of the trade was that packers sold a decent number of hides during the week of July 24. This led to thoughts that we would not see as many hides offered last week, especially for August shipment.
As to sales last week, most sources said interest was noticeably less than in the previous week, supporting the argument that it is unlikely that packers liquidated their production. This is becoming a common theme in 2017. Even more interesting was last Thursday’s USDA Export Sales Report, which had combined sales of 685,200 hides. This technically exceeded the slaughter, but was well short of what many pundits had been expecting. That being said, some sources are reporting that the number was not higher because sales concluded towards the end of the week were not listed on last week’s report. This will likely make this week’s report higher than what most pundits are thinking.
With regards to trading levels last week, packers appeared to have dug in their heels at their last traded levels. Attempts to push prices lower were refused. Prospective buyers that had already replenished their raw stocks at the last reported levels decided that they would postpone buying until later this month if they could not bring prices down. They are leaning towards thoughts that pressure in the market is likely to continue.
In the cowhide trade, members of the trade report a similar situation to the big packer trade. The majority of producers had offers lists that were more populated than expected. Most producers appeared unwilling to discount prices further as they are of the opinion that cowhide prices are cheap enough and so there is no need to discount further.
As to our initial thoughts for this week, we remind our readers that we are just coming back from holiday and so are just getting our feet back on the ground. But we will not let this prevent us from sharing a couple of thoughts. As to the nation’s slaughter, we look for numbers north of 620,000 head for the next four weeks as packer margins remain lucrative and there are more than ample supplies of cattle available.
The latest USDA Report for carcass weights, released the week of July 21, said steer carcass weights were up one pound to 866 pounds, remaining 12 pounds under last year. Heifers were nine pounds under last year. Pundits are of the opinion that there appears to a point when carcass weights will increase and reach last year’s levels. Each animal will be adding tonnage to the already large supplies of beef, but the question is when this will happen.
We continue to hear that new leather orders for the fourth quarter are slow in developing. Although tanners acknowledge orders will come, there appears to be a considerable amount of concern over whether they will match the levels of a year ago. As a result, many tanners are being forced to move forward cautiously. Despite this, tanners are on record saying hide prices are more than affordable.
At the end of the day, the overall situation does not appear to be much different from when we departed for our holiday. The only exception is that we are now a little more than three weeks away from the All China Leather Exhibition, which will see many members of the trade travelling to Asia. The question is if this will be enough to ground the market before everyone gathers in Shanghai. We will have to wait and see.
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