US Perspective – 21.04.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week saw the majority of big packers enter the week in possession of offer lists that were clearly not as populated as the past several weeks. Packers were reported to have removed many of their popular selections from their offer lists, resulting in the majority of hides offered last week to be either some of their less popular wet-salted selections or wet blue.
Packers opted to leave asking prices unchanged, a direct result of decent sales over the past few weeks, coupled with April harvest levels that are bordering on historically low levels, due to problems with covid-19 in various packing houses across the nation. The biggest surprise last week on offer lists was shipping times, as the combination of lower harvest levels and decent sales had packers enjoying one of their strongest sold-forward positions in the last few months.
There were not nearly as many hides sold last week as the previous two or three weeks, while prices were no worse than steady, accompanied by isolated reports of some selections trading at incrementally higher levels.
As the week progressed it became apparent that we would be seeing harvest levels at their lowest levels in decades. We found it interesting that packers did not withdraw their offers. That said, with forecasts that this week will likely be another muted week of harvest has us leaning toward the opinion that offer lists this week could be sparsely populated and in fact, we would not be surprised if we did not see attempts by packers to push for slightly higher trading levels.
Elsewhere, reports from the cowhide trade claim offers last week were similar to those of the big packers.
Sellers may be slowly turning the tone of the market in their favour, as the combination of decent sales and a substantial reduction in harvest numbers over the past couple of weeks has supply and demand slowly coming back into balance.
Currently, 7% of fed- cattle capacity is not operating, while one plant that accounted for 4% of the weekly production was reduced to one shift of production. Meanwhile, the nation’s cow harvest was reduced by 5% with operations temporarily ceased for two weeks at a major cow plant and a processing plant was closed.
Overall, packer capacity at this time appears to be a regional issue and when a plant closes the immediate impact is on the feedlots shipping cattle to that plant. Live cattle prices are on a downward spiral and with harvest levels barely exceeding 500,000 head, it is difficult for a live trade to develop due to all of the long-term pricing arrangements currently in place.
Pack houses are essential to the food supply for the nation and it is critical that employee safety takes priority. How management teams address this moving forward will be a delicate balancing act.
