Courtesy of The Maxfield Report
www.themaxfieldreport.com

Last week was a mixed bag as it pertained to offers from the big packers. According to reports, a couple of the packers published offer lists that appeared in line with the past few weeks, with maybe one or two new selections added. Offer lists from other major packers, however, were substantially more populated and appeared to have a full complement of selections. 

Members of the trade have commented on the shipping time for some of the selections offered. According to sources, packers with larger than expected offer lists had a handful of selections available for end of May shipment (mind you, last week was mid-May), while there were also a number of selections offered for first-half June shipment, which is only 2-3 weeks away. This certainly contradicts statements made by packers over the past few weeks, laying claims to be sold through the end of July on most selections. 

Another interesting thing we saw on offer lists last week were asking prices. Asking prices on selections that had been offered the past few weeks appeared unchanged, which was not surprising. However, the surprise was that packers who added new selections to their offer lists last week were looking for prices anywhere from $2 to $5 more than their last reported trading level. 

The good news for those selling hides is it did appear as if there were a few more bids last week; however, looking back over the USDA Export Sales reports of the past couple of weeks, it is clear that the bar was not set very high. We also found it positive for those selling hides that the number of super-aggressive bids ($5 to $8 to $10 under asking prices) had dwindled considerably. 

That said, sources report that during the first half of the week, packers were countering bids at full asking prices. However, as the week progressed, there started to be “rumblings” that some packers were becoming more willing to negotiate prices – resulting in a modest amount of business concluded late in the week. This came with reports that prices were incrementally lower than the last traded levels and that packers were asking buyers to keep the trading to themselves. 

As to the number of hides exchanging hands last week, we did not see the harvest exceed the 500,000 head level, but a considerable amount of trading was concluded late in the week. We suspect that not all of the sales will be included on this week’s Export Sales Report. 

Elsewhere, reports from the cowhide trade claim some producers entered last week with offer lists more populated, while other producers opted to leave their offer lists unchanged from the past few weeks. Asking prices were unchanged with the past few weeks, as demand / interest has been rather lacklustre. 

Sources did see a few more bids than the past couple of weeks, but not nearly as much of an improvement as those selling big packer hides. That said, buyers who were willing to share their price ideas were looking for bargains and attempting to bid prices lower, with producers reluctant to trade off of their last traded levels. 

We are not aware of anyone claiming that last week was a busy week of trading, though it appears things improved the second half of the week. As to trading levels – we will call them soft, steady-to-incrementally lower, as producers recognise that harvest numbers are rising and they need to continue to sell into the market. 

The Look Ahead

Based on the improvement in harvest numbers we saw last week and a good start to this week, we are looking for another 25 to 35,000 head of cattle to be reaped this week, which should result in a final number close to 530,000 head. Keeping this in mind, we are not seeing demand for hides improve at the same rate as last week’s combined sales, which was only 468,000 hides – slightly lower than the average of the past seven weeks which had stood at 475,000 head. 

Keeping this in mind, we suspect we will see offer lists a bit more populated again this week. If the unconfirmed rumours at the end of last week that some of the packers were a bit more willing to negotiate prices prove true, it is likely we could see some softer trading levels again this week. 

We remain fixated on shipping numbers, especially to China, remembering that over the course of late March / April Chinese tanners bought more than 2 million hides. Through last week’s Export Sales Report, Chinese tanners do not appear as if they have the same enthusiasm to ship their outstanding hides as they did when they were purchased. 

This is important for a number of reasons. First and foremost, if these are not legitimate sales, packers are not sold as far forward as they had been thinking and likely need to see a few hides. It will certainly be interesting to see how producers go about their business. Meanwhile, it would be logical to think if tanners are not going to honour their outstanding sales that this would force many into the market. However, with leather orders either cancelled and/or not nearly as plentiful as expected, many tanners are substantially reducing their soaking levels and some are even closing temporarily. 

We are revisiting levels where supply and demand are getting out of balance. Harvest numbers are rising slowly and the easing of restrictions is not moving fast enough for demand to keep pace, creating a whole new set of challenges for those selling hides over the next couple of months.

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