US Perspective - 15.05.18
15/05/2018
www.themaxfieldreport.com
Reports from members of the big packer trade claim packers came into last week with offer lists which, for the most part, appeared in line with the previous week, both in terms of the number of selections and the number of loads offered. Packers started the week appearing to be content with asking prices reflecting the same levels as the previous week.
With regards to interest last week, sources reported they saw an increase in the number of bids, while it appeared the majority of buyers willing to share their price ideas started price negotiations at levels several dollars lower than official asking prices. In addition, sources reported the number of loads buyers were bidding for were for minimal quantities.
We were able to take away a couple of positives from last week’s activity. Firstly, when packers countered the aggressive bids of buyers, several opted to immediately improve their ideas by as much as $2-3. Secondly, according to various reports it appears interest was broader than in recent weeks. This led to thoughts that some buyers were perhaps sensing we are closing in on the bottom of the market.
As to the number of hides changing hands last week, popular opinion is that sales equalled the previous week. There were some suggestions there may have been more hides sold last week compared to the previous week. With this in mind, this week’s USDA Export Sales report will be interesting, especially considering that last week’s report included a sizeable number of long-term arrangements for May. If this is correct, it would have over-inflated the sales numbers in last week’s report.
Elsewhere, reports from the cowhide trade claimed offers last week from most processors were unchanged compared to the previous week. Sources also share that many lists appeared to still be well populated, with most producers offering a full complement of selections for sale.
With regards to asking prices, most sources reported that these were also unchanged. Most producers appeared to be tired of lowering prices and were happy to counter bids if/when they came in.
As to interest in cowhides last week, a number of sellers shared that they had seen an improvement in the number of bids. Sources were also quick to share that the majority of buyers willing to share their price ideas were aggressively trying to pursue lower prices, bidding $1-2 lower. However, producers made their best effort to hold prices in check, although it was believed most producers were willing to negotiate prices.
Popular opinion of the trade is that producers were able to conclude a decent amount of business. This has led to thoughts that there may have been a few more hides changing hands last week, with the majority of trading levels within a dollar or so of the last established trading levels.
The look ahead
We have started a new week of trading and the expectation of the trade is that it is likely that sellers have entered this week with offer lists that are still well populated. Most members of the trade are looking for producers to continue to have a full complement of selections offered. Meanwhile, we continue to hear reports that many sellers are spending a sizeable part of their day dealing with shipping problems and trying to collect money rather than selling hides. There are numerous reports of buyers causing sellers substantial headaches.
The price of hides is trailing the levels of a year ago – big packer hides by roughly 20% and cowhides by close to 35%, according to our TMR Hide Index. There is no question that hides are cheap and there is some chatter among members of the trade that trading levels are approaching what they believe will be the lows for the year. These same people are attempting to encourage savvy buyers to enter the market.
Meanwhile, the wildcard remains the harvest as numbers have been running at their highest levels of the year in the past few weeks. That being said, packers are registering very lucrative profits. Keeping in mind that animals are harvested for the carcass and the beef and that demand continues to exceed expectations, it doesn’t appear that packers are giving a second thought to the fact that they are labouring to clear their weekly production of hides.
At the end of the day it comes down to demand. We have written about this too many times to count; in order to see the market finally ground, we need some sustained demand as well as buyers who take delivery of their outstanding contracts, as opposed to considering them as “options to buy”. That being said, until we see producers position their sold forward positions a bit better, we expect they will continue to struggle to move these larger harvest volumes efficiently and effectively.
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