US Perspective – 10.07.18
10/07/2018
www.themaxfieldreport.com
Packers entered last week still in possession of large offers lists, with most packers offering a full complement of selections. All packers had several selections available for prompt shipment. As to asking prices last week, sources say they were $1-2 lower than the previous week, depending on the packer and the selection. However, it is widely known in the trade that several packers concluded business with tanners at levels lower than their official asking prices.
We are also aware of several packers who offered a day earlier than normal last week. They were leaning on the excuse of the Independence Day holiday in the middle of the week. The consensus of the trade was that this was confirmation that packers find themselves in an undersold situation.
With regards to interest last week, the majority of people we spoke with reported that the number of bids was disappointing. The majority of the bids last week were from buyers looking for prices $2-3 lower than the previous week. The business that was concluded took place at roughly $1-2 lower than the previous week. Despite the holiday-shortened week of harvest, it is highly unlikely that packers cleared their production last week.
By the end of last week there were a number of rumours of voluminous-type business being concluded directly with tanners. They suggested there had been sales of HNS as low as $55, BBS as low as $49, HTS/BRS/CBS as low as $37 and sales of HBH at levels of $30. Sources are also sharing that interest in wet blue hides last week was lacklustre. This is supporting claims that producers have sizeable unsold inventories due to a lack of sales in the past three to four weeks.
Elsewhere, reports from the cowhide trade claim producers entered last week with offer lists in line with the past few weeks. Most packers were offering a full complement of selections. However, we are hearing reports that several producers did not have as many loads for sale as in previous weeks.
With regards to asking prices, they were mostly unchanged from the previous few weeks. Producers appear to be making a strong attempt to establish the bottom of the market, refusing to accept price ideas lower than their last traded levels. As to interest last week, sources are calling it disappointing as many members of the trade were hoping they would see a decent amount of follow-up interest. The majority of hides sold last week traded at close to steady levels compared to the previous week.
The look ahead
As to our thoughts for this week, we continue to believe that packers entered this week in possession of a number of unsold hides. Some pundits are of the opinion that it has been quite some time since we have seen packers in such a poorly sold forward position. Supporting this opinion is that since the second week of June big packer wet salted hides have lost almost 20% of their value, while current trading levels are 43% lower than the levels of a year ago.
We are also seeing producers of wet blue hides labouring, as sales in the past four weeks have not been keeping pace with production. This has led to producers pushing hard for sales in the past couple of weeks. The good news is that shipping lanes to Italy are back open as product shipped this week will arrive after tanners finish their summer holiday. It will be interesting to see how much interest producers see, especially with reports that a number of producers in Europe are also without strong sold forward positions.
Elsewhere, we look for the harvest to return to lofty levels as margins in the packing house remain lucrative. This comes hot on the heels of better than expected beef demand and plentiful supplies of slaughter-ready cattle standing. It is likely we will see numbers in the 640,000-655,000 head range though July and August. This is unusual as we usually see numbers slowly fall after the Fourth of July holiday.
In other news, we suspect we will see producers of cow hides continue their efforts to draw a line in the sand by refusing to accept lower trading levels. Of course, there are always risks when this is attempted, but considering recent trading levels, it appears producers as a group are willing to take the risk. We will have to wait to see if they can put a bottom to this market, or if this will be just a temporary pause before prices decline further.
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