US Perspective—08.11.16
08/11/2016
www.themaxfieldreport.com
US packers started last week with offer lists fairly well populated with a full complement of selections offered, while looking for increases of roughly $1 across the board. Interest was slow starting out and, by the middle of he week, it was clear that packers were meeting a fair amount of resistance to their efforts, resulting in a few having to change course and share with perspective buyers that they would be willing to consider steady prices with the week prior. Overall, there was not nearly as much interest last week compared to the previous three or four weeks and with slaughter levels running close to their highest levels of the year (606,000 head last week), it appears the vast majority of suppliers saw their sold-forward positions dwindle a bit.
It appears that the number of heifers in the slaughter mix is finally dwindling as there have not been as many offers of heifers these last two weeks. As we are moving closer to winter, hide weights are increasing and there are numerous sources sharing that shipment of regular weight HTS is lowering considerably, while it appears there are more than ample offers of heavier-weight and extra heavyweight steer hides.
There are mixed reports as to the amount of wet blue hides for sale last week, as one of the producers who were perceived to have a substantial volume of unsold product is now insisting that the lion’s share of this product is sold and accounted for. Meanwhile, sources report that other producers with plants in the south-west continue to press for sales of wet blue HTS.
Reports from the cowhide trade are similar to those in the big packer trade. Overall, it appears most sellers started out last week with their sights set on obtaining more money; however, once they reached the middle of the week, producers failed to find as much interest as they anticipated. Sources report there is still decent interest on HNDC, while interest on HNC appeared to be enough to keep prices steady. The problem selection appears to be HBC, as interest last week declined considerably, while we are not aware of any business concluded at lower levels. There were plenty of rumours swirling, accusing producers of taking lower levels quietly.
As to our initial thoughts for this week, although it appears as if sellers lost a bit of the momentum they entered last week with, we find it hard to believe that one poor week of sales will discourage those selling hides. This week, we would be surprised if packers left their offer lists unchanged, although it is widely known that none of the packers was able to obtain any kind of appreciable increase last week; however, to lower asking prices to levels that were traded would likely be perceived as a sign of weakness.
We are only two weeks away from the Thanksgiving Holiday (November 24) and with demand for beef remaining strong, coupled with packers’ margins well into triple digits in the black, it is likely we will continue to see slaughter levels exceed 600,000 head. Producers will need to continue to sell into this market unless they want to see their sold-forward positions erode further. Elsewhere, we remain of the opinion that most producers are sold up until the Christmas Holiday. Now most have a difficult task of finding buyers willing to accept shipment from December 20 through January 15 when most of Asia will close for Chinese New Year (January 28). This is why we tend to believe that sellers will have to be either creative or willing to take a little less to keep hides moving.
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