US Perspective—17.04.18
17/04/2018
www.themaxfieldreport.com
Packers entered last week once again with offer lists that appeared to have a full complement of selections. Most popular selections reflected little, if any, change in asking prices, while several of the packers were reported to have lowered asking prices on some of their more difficult-to-sell selections, ranging by $1-$2, depending on the packer and the selection.
Interest in wet-salted hides was disappointing for most producers, leading to reports that by the middle of the week many of the packers were willing to listen to the lower ideas of buyers. There were rumours of various packers of attempting to offer direct to some of their favourite tanners at prices much lower than the prices listed on their offer lists.
There was no shortage of wet blue hides on offer from producers last week, as several sources reported most producers had a full complement of selections offered. As to asking prices, packers started the week with offers unchanged from last week; however, as the week progressed and interest in wet blue proved not nearly as brisk as the week prior, there were a number of producers who appeared a bit more willing to negotiate prices.
As to sales, the consensus of the trade is that last week was likely not as busy as the past two or three weeks. However, we also need to keep in mind that if some of the packers have decided to sell large quantities directly to tanners quietly at levels several dollars below the market, it makes it much more difficult to assess this situation.
Working against packers is the fact that harvest levels are poised to move substantially higher. Packers’ margins are very lucrative and with it appearing as if after this week the weather for most of the US should move towards seasonable levels, this will increase demand for beef and push harvest levels in our opinion closer to levels of 625,000 head, versus the sub 600,000 head levels we saw much of the first quarter of this year.
Members of the cowhide trade claim a similar story. Producers entered the week with offer lists that appeared well populated with asking prices that were “all over the board”. Reports from various members of the trade claim that tanners were not nearly as active as in the past couple of weeks. Prices were “negotiable” and if producers wanted to move especially large quantities, they had to be willing to negotiate trading levels. Trading levels were down anywhere from $1-$2 depending on the producer and the selection.
We are not sure there is any substantial change in the market place compared to the last several weeks. Overall, producers do not possess the sold-forward positions they are advertising. With the exception of HNS, packers and processors are more than happy to ship outstanding contracts earlier than contracted.
Meanwhile, packers’ margins are running at lucrative levels and with it appearing that once we can get past this week, the weather for most of the US should return to more seasonable levels. This should encourage an improvement in the demand for beef. We could see harvest levels move quickly towards the 640,000 head levels on a weekly basis.
The other challenge facing those selling hides is that sales made prior to the APLF exhibition in March or during the fair are now vulnerable, especially over sales concluded on cowhides, because current trading levels are substantially lower. For now, trading levels on big packer hides are within reach of previous levels; however, should we see harvest levels increase, as we are expecting, and packers continue to “dig in their heels” at the asking prices, this could increase the possibility of future problems as we move forward.
If, soon, there is not enough demand to support the number of hides being produced on a weekly basis, we would be looking to sell into this market.
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