US Perspective—28.04.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Maxfield report
Packers entered last week with offer lists that were not nearly as populated as only a couple of weeks ago, with many of tanners’ favourite selections absent from most lists. According to sources, the handful offered included many of the less-popular selections, and it appeared that prompt shipment items were no longer available either.
It appeared packers were willing to leave asking prices unchanged on the selections offered, while there did not seem to be as many loads offered. In regard to interest last week, we understand that unsolicited bids were being quickly dismissed by packers. Initial ideas of buyers on selections offered were coming in a dollar or two lower than the last traded levels and were being countered at full asking prices.
In regard to the number of hides exchanged, after three fantastic weeks of sales, there was not as much business concluded last week. Sales were concluded at fully steady levels, while there were a few unconfirmed rumours towards the end of last week that some business concluded at incrementally higher levels.
Members of the cowhide trade report that offer lists were a bit more populated last week, which is attributed to the fact that 50% lean prices are rapidly increasing. We understand most producers opted to leave prices unchanged from the week prior, while we did hear of a couple of producers who raised prices of some selections incrementally.
Similar to the big packer trade, sources claim there were not as many bids to choose from last week, while buyers bidding unsolicited found producers unwilling to extend their positions. Buyers with price ideas lower than the last traded levels found producers unwilling to consider discounting their material further and were countering at full asking prices. It is unlikely there were as many hides exchanging hands last week compared to the last 2-3 weeks. Trading levels appeared to be no worse than steady-to-incrementally higher.
The Look Ahead
The big talk in the hide trade is harvest levels or, actually, the lack of numbers. Beef packers are currently running at close to 65% of plant capacity and expectations are that an increase in numbers this week is unlikely. The reduced harvest levels are due to closures, worker absenteeism and reduced chain speeds for plants still open — all put in place to keep workers safe from the covid-19 virus. The harvest total last week was only 465,000 head, the lowest non-holiday week in decades; this follows the week prior that stands at 502,000 head, which was the previous low.
Elsewhere, the weekly hog harvest is being impacted even more than the beef harvest due to plant closures and slowdowns. The harvest for the week ending March 21 was an all-time record at 2.79 million head. Four weeks later the harvest is down 20% to 2.24 million head. Before last week, plants were operating at 71% capacity. However, this was before Tyson suspended operations at Waterloo Iowa (one of the largest pig plants) and Logansport Indiana. In addition, JBS closed its Worthington Minnesota plants, while Smithfield Foods plant in Sioux Falls South Dakota recently closed. These four plants represent 15% of total daily pork processing capacity.
We suspect we will see another anaemic beef harvest this week, which could mean we will see few, if any, offers from packers this week. That said, if we do see any offers this week, there may be temptations by packers to try and raise prices, especially with producers enjoying their strongest sold forward positions in the past several months.
The key for us this week is to monitor shipments, as well as interest from tanners this week. Shipments last week were the lowest of the year and this is not good news for producers. Meanwhile, there continue to be plenty of questions in regards to demand, accompanied by numerous rumours of leather orders being cancelled by many of the brands. We will be very interested to see how tanners address this problem.
