US PERSPECTIVE - 05.05.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week began with only a limited number of offers from packers, a combination of better than expected sales the first few weeks in April and harvest numbers the past couple of weeks that have been running close to only 60% of levels of a year ago. As a result, packers found themselves in possession of exceptionally strong sold-forward positions and with the prospect that harvest numbers were not going to improve anytime soon had most only willing to offer a few “oddball selections”.
Sources claim packers appeared content to leave asking prices unchanged with last week. Meanwhile, sources share the offers of prompt shipment of a few weeks ago are something of the past, as the offers seen last week were for late May / June.
There were clearly not as many bids to consider last week as the week prior, confirmed by last week’s USDA Export Sales Report. That said, we understand that buyers with unsolicited bids were quickly dismissed by packers, as it was clear they had no interest in extending their already oversold position on some of the more popular selections.
Bids on selections offered that were coming in a dollar or two lower than last week were being countered at full asking prices by packers, as it was clear packers had no intention of trading the market lower. Trading levels were equal with the week prior, while there is a good likelihood we saw fewer hides sold than the week prior.
Cowhide producers reportedly possessed one of their strongest sold forward positions in months, attributed to the large round of interest from Chinese tanners in April, coupled with the sizeable reduction in harvest numbers.
According to sources, offers last week were limited at best, as most producers were only offering a few hard-to-sell selections, as many of the more favourite selections of tanners appeared as if they were sold.
Asking prices were unchanged with the past couple of weeks and as if producers were content with holding prices steady. There were not as many bids as the week prior, with sources blaming the lack of offers and the large round of business the few weeks prior.
Unsolicited bids were passed by producers, while bids on items offered that were coming in lower than asking prices were being countered at full asking prices.
It was not a busy week of trading.
THE LOOK AHEAD
As to thoughts for this week, we are of the opinion President Trump's executive order requiring meat and poultry processing plants to stay open will do little or nothing to address the decline in meat production. That is because it does not address the growing absenteeism that is forcing beef and pork plants to run at 60% to 70% of capacity. That said, even the President’s order cannot force workers to return to work who are at home after testing positive for covid-19 or fear they will be infected if they return to work. Marc Perrone, international president of the United Food and Commercial Workers International Union (UFCU), states that more than 5,000 meatpacking workers have been hospitalised or are showing symptoms and at least 20 have died. Worth noting, there are some positive measures in the order, as the federal government will provide additional protective gear for employees as well as guidance. This might help packers put more worker safety measures in place, but it will depend on how much the government fulfils this promise.
More positive for packers is that the Labour Department plans to issue guidance aimed at giving plant owners protection from any liability that could result from keeping plants open. The order will also prevent state or local health officials from demanding that plants close. Keeping the above in mind, there have been initiatives announced by packers to provide medical tents at facilities, in addition, to increasing hourly wages, as well as increasing short-term disability pay and bonuses.
In my opinion, a combination of the safety measures the US government is offering in combination of the financial incentives and access to medical facilities for employees will go a long way towards ensuring the confidence of employees and hopefully we can / will be them back to work soon as there are some food shortage issues looming, not to mention the fact that the livestock markets are being decimated by this.
As to thoughts for this week, we have a difficult time believing we will see any more hides offered, especially knowing last week’s harvest was the smallest non-holiday week in several decades. We are still very interested in shipping number - especially to China, keeping in mind the huge number of hides they bought last month. For now, it appears as if we are in a very steady market and with few, if any hides to sell, we cannot see prices changing for the interim.
