US Perspective—10.03.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
According to the big packer trade, packers entered the week still possessing a number of unsold hides. This was in spite of widespread reports that many packers were aggressively booking orders at the end of the week prior. Asking prices last week, sources report, were a bit of a mixed bag. Some opted to leave their asking prices unchanged in spite of reports of selling at noticeably lower levels, while other packers lowered their ideas by a couple of dollars – which the trade interpreted as an effort to bring asking prices closer to actual trading levels.
As to interest last week, more Chinese tanners are returning to work which, combined with tanners who have already returned, marked a move back towards normal soaking levels for this time of year – resulting in a higher number of bids last week. The challenge facing packers is the general perception among tanners that there are a number of unsold hides in the US. Many packers are pressing potential buyers for voluminous-type business and prompt shipment, which only encouraged potential buyers to bid aggressively lower last week than the last traded levels.
The good news for packers is that, after having to negotiate prices most of the week, they became less willing to negotiate by the week’s end. This suggested packers had addressed some of their most pressing needs for the next couple of weeks and were perhaps looking to try and stabilize prices, after watching most prices fall by as much as 35% since Chinese New Year.
In regards to the number of hides sold, we are not aware of any pundit claiming that packers sold a week’s worth of production last week. However, popular opinion says there were a decent number of hides sold late the week prior that likely did not make last week’s Export Sales Report. If that’s correct, we lean towards the belief that we’ll see a surpassingly large sales number on this week’s report. As to trading levels, prices were down roughly a dollar across the board, although we know of isolated selections that traded down as much as a couple of bucks.
Reports from members of the cowhide trade claim most cowhide producers entered the week with offer lists that had offered a full complement of selections, with many available for prompt shipment. That said, we did hear “rumblings” of a producer or two who seemed not to have as many hides for sale, but this certainly appeared to be the exception to the rule last week.
As to asking prices, like big packer hides, sources report this was also mixed. We understand a couple of producers opted to leave their asking prices unchanged last week, while the majority of others lowered their price ideas by a dollar or two, depending on the selections as well as the producers.
We heard from a couple of sources that they were able to sell some limited volumes at their asking prices; however, it should be noted they were claiming to have enjoyed a decent sold forward position. Meanwhile, other producers were not as fortunate and shared that the number of bids they saw ranged from disappointing to slightly lower than average.
Overall, the majority of buyers had their sights set on taking prices down even further last week and, although there was a limited amount of business, they concluded at steady levels. It seems most producers had to resign themselves to taking less money last week, while it is highly unlikely that we saw producers sell a week’s worth of production.
THE LOOK AHEAD
At the close of last week, we were starting to believe that perhaps we had seen producers position themselves better and that there may be a chance we could see prices stabilize. However, this was before Russia and members of OPEC decided to clash over oil production, driving oil prices sharply lower, as the mainstream media maintained their ongoing coverage of COVID-19 – leading the US DJIA to drop nearly 2000 points. All of the above continues to feed into the fears of the general public.
In other news, surprisingly US big packers continue to enjoy decent demand for beef domestically. With live cattle prices following commodities sharply lower, that is only adding to the bottom line of packers, which is encouraging them to harvest even more cattle. This results in the production of more hides that packers are already struggling to sell.
Some initial thoughts for this week: as mentioned above, we are looking for a harvest number in line with next week, if not slightly higher (which does not look right as we type it, considering we are in the midst of the Lenten Season and the second week of March). Should this come to fruition, this is only added volume for producers to sell – whose struggles for the last 4-6 weeks are already well documented.
The good news is that, as Chinese tanneries slowly resume normal soaking levels for this time of year, there will be a need for product. Congestion at various Chinese ports should begin to ease.
