US Perspective—07.04.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Maxfield report
Most packers entered last week with offer lists that appeared to have a full complement of offers. This was in spite of last week’s USDA Export Sales Report that confirmed packers enjoyed their busiest week of trading of the year, with more than 600,000 hides sold. That said, sources claim most packers were still aggressively seeking sales, which is understandable considering how many head of cattle we have seen harvested over the past 3-4 weeks.
Asking prices were anywhere from $1 to $2 lower than the week prior, while there were reports of some packers lowering prices by as much as $3 to $4. This was interpreted as an effort to bring asking prices more in line with recent trading levels. In spite of the lower-priced offers, asking prices at the start of last week were still slightly higher than known trading levels at the end of the week prior.
There seemed to be a decent number of bids last week, while buyers in general – especially those able and willing to consider voluminous type business – continued to bid prices lower than the last traded levels. Popular opinion is that last week was a decent week of trading for most packers; however, we are not aware of any pundit expecting this week’s USDA Export Sales Report to equal last week’s report.
In trading levels, prices were easily $1 to $2 lower than the week prior. The good news is that some packers were reportedly dismissing ultra-aggressive bids from buyers who appeared to be “bottom-feeding” last week. Harvest levels last week started exhibiting signs of easing, resulting from a combination of beef demand finally catching up and packers being forced to slow their chain speeds due to employees unable to come to work (whether they or a family member had contacted COVID-19). This suggests we could see this trend of lower chain speeds continue to the foreseeable future.
Reports from the cowhide trade claim that producers entered the week in possession of offer lists that suggested they still had a full complement of selections for sale. We understand that producers lowered most prices by roughly a dollar across the boards, while asking prices of some selections were reported to border on having no value.
Sources report there were not nearly as many bids as the week prior. In our opinion this is attributed to two things: One, there are numerous offers of cowhides from numerous producers around the globe. Two, as prices of big packer hides approach levels we have not seen in our nearly thirty years in the business, big packers’ hides are offering prospective buyers more value for their money.
In regard to trading last week, sources claim there was a modest number of hides sold at levels $1 to $2 lower than the week prior, and we are not aware of many pundits indicating there was a week’s worth of production sold last week.
THE LOOK AHEAD
We are setting out on a new week of trading and, as mentioned earlier, it appears consumers in the US have satisfied their quests to fill their refrigerators / freezers with beef due to shelter-at-home orders. As a result, demand for beef started to soften last week, forcing the cutout lower; however, the good news for packers is their margins are still lucrative, as they could afford the decline,
Lower harvest numbers will be welcomed by those selling hides, as the last several weeks have seen producers struggle to keep product moving. The bad news for those selling hides, though, is there likely needs to be another 100,000 to 150,000 fewer animals harvested for this to make a difference. At the end of the day, any decrease in the harvest will obviously help as demand remains lacklustre.
The month of April could prove a difficult time for those selling hides. Reliable sources say that a number of automotive, as well as shoe and boot tanners in Mexico, will be closed all month, reopening May 4th. In addition, we are hearing many tanners in Europe and Asia will be closed for some or most of the month, pointing to a lack of leather orders and concerns surrounding COVID-19.
As long as there is a substantial imbalance between supply and demand, we believe those selling hides will see their creative skills challenged. The name of the game at this point in time is to simply do your best to keep hides moving.
