US Perspective—30.06.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week in the big packer trade, offer lists of wet-salted hides were not quite as populated as the week prior, while offers of wet-blue hides continue to show more than ample offers. For the most part, packers opted to leave prices on most selections unchanged, while we did hear of some packers raising asking prices on their offers of tanners’ favorite selections.
The most noticeable change on offers lists were reports that shipping times were adjusted from July / Aug shipment to mostly only August shipment, which suggests packers enjoyed a decent week of sales the week prior. This was confirmed by the USDA Export Sales Report on Thursday.
There were indications by some wet-blue producers that they may not be as firm on their asking prices. Agents for producers were said to be aggressively approaching prospective buyers and expressing interest in voluminous type business, of course at levels that could be negotiated.
As to interest last week, there were not as many bids last week as the week prior. The Dragan Boat Festival in China, held the second half of last week, certainly attributed to a decline in the number of bids.
Unlike the week prior, when there appeared to be some modest interest from tanners outside of China, this interest dried up considerably last week. The good news is that there was a bit more interest coming from automotive tanners in Mexico.
For the most part, packers were able to trade at their last traded levels, while attempts to sell at slightly higher levels were met with as much resistance as efforts to bid prices lower. It is highly unlikely that we saw packers sell their production last week, especially keeping in mind that last week’s harvest at 680,000 head is the largest “knock” we have seen in the last decade.
Elsewhere, reports from the cowhide trade claim producers entered last week appearing to have a full complement of selections offered; the majority of producers had more hides for sale than they were willing to admit. Producers collectively seemed to have left asking prices unchanged, claiming that prices of some lower grade selections are already priced so low that any further discount would render the hide worthless.
Similar to the big packer trade, there certainly were not as many bids as the week prior, with most members of the trade claiming there are simply too many offers globally of lower grade hides. The holiday in China late last week also did not help with the number of bids.
It is widely agreed that trading levels appeared to be in line with the last reported trading levels, and although the number of cows in the harvest mix appears to be finally dwindling on the heels of demand for 90% lean easing, we are not aware of many pundits who think producers liquidated their harvest last week.
The Look Ahead
This week, the US will observe Independence Day on July 4th and many offices will be closed on Friday. Keeping this in mind, last week we saw the largest harvest in the last decade at 680,000 head, which can mean that demand for beef remains stronger than even the most optimistic of guesses.
That said, packers face a bit of a “ticklish” situation with the holiday on Saturday. If any of the packers would schedule work, it would come at a cost of pay for the holiday, plus time and one-half — as the workforce would already have worked 40 hours — thus, any time worked on Saturday would come at a cost of double time and a half for all work.
Considering the extremely large harvest last week and the lack of sales, it is likely we will see offer lists a bit more populated this week. That said, those looking for producers to lower their price ideas will likely be disappointed, as we are unlikely to see any change in asking prices to start the week.
In regard to interest, this will be very interesting. Chinese tanners dominated purchases of wet-salted hides in the second quarter of this year and we will have to see if this trend continues in the third quarter. Meanwhile, we are starting to see some signs of life from some of the automotive tanners in China, as well as in Mexico, and the US Government just announced that pending home sales in May spiked 44.3% — fuelling a strong move in the DJIA.
