US Perspective – 24.04.18
24/04/2018
www.themaxfieldreport.com
Reports from the big packer trade claim packers entered last week with offer lists that were fairly well populated. It is worth noting that there were several selections listed for April shipment; the majority of selections offered were for May shipment. What really caught our attention was the lack of offers for June or even July shipment. If memory serves us correctly, there were some packers who were touting May/June shipment when offering prior to the APLF exhibition in March and immediately following the fair.
As to asking prices last week, packers made their best efforts to hold prices as close to their last traded levels as possible. However, with widespread speculation amongst tanners that most packers had more than ample supplies of hides for sale and many for prompt shipment, buyers willing to share their price ideas took aim at lower prices.
According to our sources, bids at the start of the week at levels several dollars lower than asking prices were countered at steady to incrementally-lower levels. However, when counters were received, most buyers refused to improve their bids, which in turn were re-countered by packers at levels $1 lower than the original countered levels. Once again, buyers refused to improve their bids and by the end of the week there were reports that many packers were begrudgingly accepting the original bids of the buyers.
Meanwhile, we understand there continues to be decent interest/demand for wet blue steer hides. According to sources, many tanners in Asia appear to be focused on taking delivery of wet blue hides as opposed to wet salted hides. We suspect this is tanners attempting to avoid taking delivery of end of the winter hides, especially keeping in mind that much of the US has suffered through a colder temperature and heavier snowfalls than normal. There appears to be no shortage of wet blue hides being offered, with a number of selections, especially heifers, available for prompt shipment.
With regards to sales last week, the sentiment of the trade is that trading levels were roughly $1-$1.50 lower than the previous week. There are rumours that many packers concluded direct business with tanners at trading levels well below some of the prices being reported.
As to the number of hides changing hands last week, this is a bit more difficult to determine. If the rumours of “secret deals” at lower levels are correct, we are inclined to believe there was a decent number of hides sold last week. However, if these rumours are just rumours, we suspect we will see a number similar to the previous week.
In the cowhide trade, members of the trade report that most producers entered last week with offer lists that were still well populated, while several producers appeared to have selections available for prompt shipment. We understand prices were “all over the board” as trading levels for cowhides remain a bit of a moving target.
As to interest last week, popular opinion amongst tanners is that there continues to be numerous producers from all points around the globe looking for voluminous type business and for prompt shipment. This is encouraging prospective buyers to take dead aim at even lower trading levels. Last week, producers in the US appeared to take a hard stance against trading at lower levels, refusing to trade at prices lower than their last traded levels.
Although we are not in a position to claim the cowhide market has bottomed, it certainly appears as if producers are in a frame of mind where enough is enough. At least for the moment, it looks as if they are making a strong attempt to ground the market.
The look ahead
As to some initial thoughts for this week, we are of the opinion that harvest levels are primed to move to higher levels. Last week’s total of 624,000 head is a high for the year; however, with packers able to advance box prices at the end of last week and most of the US finally starting to see more seasonable weather patterns, we are going to make an argument that demand for beef will improve. This, coupled with margins running at such lucrative levels, means packers will be encouraged to push more volume through their facility.
With regards to offers this week, we suspect there are still a number of producers looking for buyers who are willing to consider business for prompt shipment. This is especially relevant given reports of tanners either asking to delay shipment or taking their time opening their lines of credit. In addition, we are hearing reports of tanners asking to renegotiate contracts and some tanners even cancelling sales concluded last month. This is never a positive for the market as it forces sellers to sell the same hides a second and even third time, depending on the severity of the situation and number of tanners pursuing these options.
For now, our opinion of the market has not changed as there continues to be more supply than demand. Until we see a major change in fashion, we would encourage sellers to sell into the market, while paying close attention to outstanding contracts to ensure they are liquidated in order to minimise problems.
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