US Perspective—12.05.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week was another in which packers only had a paltry list of hides to offer, with the majority of selections representing the least favourite options of most tanners. With packers laying claim to the strongest sold-forward position of the last couple of years, buyers with unsolicited interest discovered very quickly that packers had no interest in extending these further.
There was a slight improvement in the number of bids last week; however, looking at last week’s USDA Export Sales Report, it is clear the bar was not set too high. With regard to trading levels, the consensus is that business was concluded at no worse than steady levels, while the few isolated attempts by packers to achieve slightly higher trading levels were met with resistance from buyers. We did see an improvement in the number of hides sold last week but we are not aware of claims that packers were able to liquidate their production.
Elsewhere, reports from the cowhide trade were of a repeat of the week prior. Tanners looking to bid lower than the last established trading levels on hides found producers unwilling to negotiate prices. Producers were able to hold prices in line with the week prior.
We suspect all eyes will be on harvest numbers this week, as it appears the substantial downturn in harvest numbers subsided last week and that we saw a small improvement in harvest numbers over the week prior. It is still a far cry from the same week last year when we saw 667,000 head reaped.
Expectations are that we will see more numbers this week a final harvest number exceeding 500,000 head. The trip back to “normal” is not going to take place overnight; the improvement will be slow and steady and may take us until June to see more “normal” numbers.
The implications of dealing with a backlog of 1 million overfed cattle is expected to hang over the market for the balance of the year unless the supply-demand balance between fed cattle and beef demand is somehow restored. The plants do not need more demand today, but they will need lots of help working off the backlog of cattle which can be done by restoring harvest volumes and at the same time creating a market for the excess beef.
Producers need to start re-offering various selections of hides in order to preserve sold-forward positions. Each week we will see harvest volumes rise and with consumer demand still lacklustre as the US and Europe attempt to return to “normal” levels, we are of the opinion that producers should start to sell into this market to avoid a repeat of what transpired the first half of March.
