US Perspective - 26.5.17
30/05/2017
www.themaxfieldreport.com
Reports from the big packer trade claim activity this week was not nearly as brisk as last week. Sources report prospective buyers made their best attempts to bid prices lower.
However, packers, after enjoying a couple of weeks of decent sales, refused to succumb to lower prices, and there was at least one insisting they were able to obtain higher prices than they received the previous week.
Overall, the consensus is the number of hides exchanging hands was lower than last week, leading to questions if sales were equal to the slaughter. Prices were no worse than steady, while prevailing opinion of pundits is that if packers would have been agreeable to accepting slightly lower trading levels, they could have sold more hides.
After a decent week of wet-blue sales for producers, interest was also not nearly as brisk, while we have heard from reliable sources that they were able to buy at levels a dollar lower than last week.
Reports from Asia claim there were more than ample offers at the start of the week, which confused tanners, as many of the packers had been touting decent sales the past couple of weeks. Some sources said interest was not as robust as the last couple of weeks, while some of the packers laying said they were able to obtain slightly higher trading levels, although these claims could not be substantiated.
Many tanners seem more interested in the situation in Brazil this week [JBS executives accused of improper payments] and trying to determine what, if any, consequence it might have on the hide market.
Elsewhere, reports claim business for side-leather tanners in the Chinese domestic market continues to fall short of expectations, while leather orders for export tanners appears mixed, depending on the brand tanners are producing for.
Automotive and upholstery tanners appear to have steady orders; however, there is an increasing number of complaints from automotive tanners claiming they are seeing a slowdown in their requirements for the third quarter.
In other news, we continue to hear reports of agents for many sellers working overtime to secure letters of credit opening from older, more expensive contracts sold around the time of the APLF at the end of March. There are also some reporting that a number of producers are aggressively offering tanners holding expensive contracts some “creative” options to provide the tanner an opportunity to average down their more expensive outstanding orders.
Reports from members of the cowhide trade claim interest has exceeded expectations this week. Several sources said they have been able to sell a decent number of hides, allowing them to get out from underneath their unsold inventory. In fact, several producers are laying claims to being able to sell at slightly higher levels the last couple of days as opposed to levels earlier in the week.
Overall, producers appear pleased and it will be interesting to see if there is follow-up interest next week. In the meantime, all eyes continue to focus on Brazil to see if the situation will result in any disruption in production.
The number of cowhides in the slaughter mix is not exhibiting any signs of slowing, while members of the trade monitoring reports from Europe say producers there have unsold quantities of cowhides. We were able to round up reports of sales taking place at slightly higher levels, led by reports that HNDC sold at $53, while there are rumours of sales as high as $54, which we
could not confirm. Other trading claim sales of HNC were registered at $39, while sales concluded on
HBC has material in the North at $32 and in the South at $28.
THE LOOK AHEAD
As the market closes, it appears we are on the verge of a two-tiered market, as we have steers prices that have stabilised, while cowhide prices have bottomed slightly higher than their last traded levels.
The trade continues to decipher what is happening in Brazil and its potential, if any, effect on the market.
In the meantime, there is a simple “key” to gauge box beef demand, that being the Saturday slaughter before and after a holiday as these two days offer packers the only opportunity to “make up” production lost due to the holiday. That said, tomorrow’s harvest at 38,000 head is in line with recent Saturday numbers and we believe indicates that beef demand is not as strong as normal for this time of year. This leads us to suspect that slaughter levels in June will not be quite as high as some are expecting, as we are thinking 600-615,000 on a weekly basis, as opposed to 625,000 head and higher on a regular basis.
We will see a holiday-shorted week of slaughter next week and there will be no sense of urgency from producers to offers on Tuesday afternoon as usual. Meanwhile, considering producers appear somewhat pleased with sales the past couple of weeks, we look for offers to remain unchanged, while we would not be shocked if some of the more aggressive sellers did not try to raise asking prices by a dollar on some of the more popular selections.
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