Courtesy of The Maxfield Report
www.themaxfieldreport.com

Last week packers entered the week as if they were in no hurry to offer – many did not release their offer lists until late in the day on Tuesday. Once offers were released, expectations of the trade did not come to fruition, as most pundits were looking for offer lists to be fairly well populated. 

Offer lists from the packers appeared to be in line with the past few weeks, with most continuing to have several selections of hides for sale; asking prices, collectively, were relatively unchanged. The most noticeable change on offer lists were claims that shipping times for most selections offered were out as far as August, while only a few isolated selections were still being offered for end July shipment. 

The number of bids last week reflected an improvement compared to the week prior. Buyers willing to share their price ideas towards the beginning of the week were submitting bids that ran $2-$3 under the asking prices of packers. Packers were reported to be countering bids at full asking prices, refusing to negotiate prices. After some consideration, a fair number of buyers improved their bids and business was concluded at the last traded levels. 

As to the number of hides sold last week, packers likely came close to liquidating their harvest, especially keeping in mind last week’s harvest was shortened due to the holiday at the end of last week and likely to come in around 615,000 head, compared to the 680,000 head the week prior.

Elsewhere, members of the cowhide trade claim producers entered the week appearing to have offer lists that were fairly well populated as the past several weeks, while many producers likely had more hides for sale than they were willing to admit. 

In spite of the large offer lists, asking prices were reported to be unchanged from the past few weeks, as producers continued to insist that asking prices of some selections were so low, that lowering them any further would make it not worthwhile to process the hides. 

Interest last week was sporadic at best. Some had a decent number of bids last week, while others claim they were actually disappointed with the number they saw. This lack of interest is attributed to widespread offers of cowhides from various origins around the globe. 

As a group, producers made their best effort to hold prices as close to steady as possible. Meanwhile, it is highly unlikely that producers cleared their production last week, especially with the number of cows in the harvest mix continuing at unseasonably high levels. 

The Look Ahead
As we are past the 4th of July holiday, we will not see any holiday shortened weeks of harvest for the next couple of months. That said, we are not convinced we will see harvest numbers return to levels prior to the holiday last week (680,000 head) – especially with some states re-closing bars and restaurants. We saw a surprisingly smaller than expected harvest last Friday and we are going to peg our weekly guess at 632,000 head, nearly 50,000 head lower than the week prior to the holiday. 

We remain very concerned about the glaring deficit between the harvest and shipments over the course of the second quarter and it’s likely that the first week of the 3Q did not produce any different results. Producers are setting themselves up for some serious problems in the coming weeks unless we see this situation turn around. 

Finally, we have concerns about the imbalance of sales as it pertains to wet-salted hides. Over the course of the second quarter sales to Chinese tanners have been running at levels of 88%, compared to 60% for all of 2019. Not that we have any “axe to grind” with Chinese tanners; however, placing nearly all of your outstanding sales into one country is not an ideal situation. 

Our opinion of the market remains unchanged. Although we understand producers have been resisting efforts from buyers to trade at lower levels, we are likely to see lower prices, before we see higher prices.

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