US Perspective - 28.07.20
28/07/2020
www.themaxfieldreport.com
Surprisingly, the majority of packers entered last week with offer lists noticeably smaller than the past few weeks, as packers removed a number of selections from their offer lists. Most opted to leave asking prices unchanged, although there were a few instances where packers were seeking slightly higher asking prices – fifty cents to a dollar.
There were once again more than ample offers of wet-blue hides last week, as many of the selec-tions were readily available for prompt shipment. On the surface, asking prices were unchanged from the past few weeks, but there were numerous “rumblings” of special offers from some pro-ducers and claims that asking prices on these special offers were barely $10 over the asking pric-es of equivalent wet-salted offers.
In regards to interest last week, there were not nearly as many bids as the previous couple of weeks, while packers kept their sights on holding prices steady with last week. We understand some of the early aggressive price ideas from buyers were not nearly as prevalent as the past few weeks, and many buyers came out bidding only slightly lower than asking prices.
Due to lack of offers, it is unlikely that we saw as many hides sold the past couple of weeks and likely we will see a smaller number on this week’s Export Sales Report. The good news for those selling hides is that trading levels were no worse than steady for most of the hides sold last week. There were instances where packers were able to eke out incremental increases of fifty cents to a dollar on some selections.
Offers last week appeared to be in line with the past few weeks, both in terms of the number of selections offered and the number of loads offered. In addition, asking prices seemed unchanged as well. The good news for producers is that interest on HNDC the past couple of weeks has been deemed fairly decent and this has allowed a number of producers to improve their sold for-ward position, while other producers have been able to take advantage of this to register some higher prices.
We are not aware of any producers seeing substantial improvement in the number of bids last week, while members of the trade say there were fewer bids last week compared to the past cou-ple of weeks. That said, buyers started the week attempting to bid prices lower, while producers as a group continued to insist on adhering to no worse than steady prices with last week.
The good news for those selling hides is that sales were concluded at steady levels for the most part, while there were some opportunities for producers to eke out incremental increases. As to the number of hides sold last week, the consensus of most pundits is that it is unlikely producers sold their production.
The Look Ahead
At the end of last week, the USDA released its Cattle on Feed Report, as well as the mid-year Cattle Inventory Report. In general, there were few surprises on the two cattle reports, as the Cat-tle on Feed Report was slightly bullish with smaller placements than the average of estimates leaving the on feed total slightly lower than expectations. Meanwhile, the cattle inventory was slightly bearish with a few more cattle than expected; however, the major categories of all beef cows and calf crop were in line with expectations, while a few more replacement steers and heif-ers above 500 pounds were reported.
Calculated estimates of cattle on feed over 120 days is still very large compared to last year, but the difference has decreased by some 160,000 head since May. It appears the backlog is decreas-ing, but a sizable number of cattle remain to be cleaned up before feedlots will be current. In the January to April period, feedlot placements were down just over a million head year-over-year.
In addition, the Cattle on Feed Report indicated some regional drought impacts, as June place-ments were large year-over-year in both Texas and Colorado, with both states showing an in-crease in placements under 700 pounds. In fact, the 8.8% year-over-year increase in placements under 700 pounds in the report is entirely accounted for by increased lightweight placements in Texas and Colorado.
This report was anticipated, in part, to see if it provided any indications that the industry is liqui-dating due to the turmoil and market shocks of recent months. The slow decrease in beef cow numbers is consistent with the January pace and, combined with stable replacement heifer num-bers, does not indicate any accelerated liquidation at this point. That said, the second-half of the year may tell the tale as cow-calf producers react to autumn calf market conditions. Overall, it ap-pears that cattle numbers continue a slow tightening of inventories going forward.
As to this week, we agree with members of the trade that there were not as many hides sold last week compared to the past couple of weeks and logic would dictate that we could see a few more offers this week. It certainly appears as if producers have a little bit of momentum behind them and it will be interesting to see if they can parlay this into additional sales this week at slightly higher prices.
We remain concerned about the lack of shipments compared to the harvest; however, collectively, producers appear as if they have no intention of negotiating trading levels with prospective buy-ers and it will be interesting to see how this week plays out.
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