US Perspective – 03.04.18
03/04/2018
www.themaxfieldreport.com
Last week in the big packer trade, packers started the week with offers that for the most part were in line with the past few weeks. Most of the offer lists published contained a full complement of selections offered. It appeared packers were seeking steady prices on their more popular sections, while pricing less popular selections a dollar lower. The one exception was that several of the packers added heifer selections to their offer lists; this time of year is known for a sizeable increase in the number of females coming to harvest.
Elsewhere, we heard from reliable sources that several wet blue producers also published fairly populated offer lists last week. There was also speculation that several selections of wet blue offered were likely available for prompt shipment.
As to sales last week, on the surface popular opinion of the trade is that last week was not a particularly busy week of trading, especially with packers insisting on trading levels as close to steady as possible. Meanwhile, there were several unconfirmed rumours that several of the packers were trying to conclude business direct with tanners at levels believed to be several dollars lower than those which they were advertising. We have one sale to share from over the weekend; a member of the trade shared with us that they had concluded some business on BBS at levels of $58.
In other news, reports from members of the cowhide trade suggest that most producers continue to struggle. According to sources, offer lists last week were in line with the last couple of weeks. However, considering the amount of underlying pressure facing the cowhide trade, offer lists are being viewed as a guideline by perspective buyers; the sentiment of the trade is that producers are more than happy to negotiate prices, especially for volume-type business.
As to interest last week, most sources claim that buyers were reluctant to share their price ideas, claiming they did not have enough leather orders, while the few buyers willing to share their price ideas were reported to be “swinging for the fences” (bidding prices aggressively lower). This was accompanied by reports of many sellers feeling a considerable amount of angst as they struggled to decide whether or not they should pursue this business.
Meanwhile, there were numerous reports that various cowhide producers were selling hides at levels well below those reported on our price guide. These reports could not be confirmed, although several veteran pundits were leaning towards thoughts that there might be some substance to these rumours.
The look ahead
This week marks the first week of the second quarter. Looking back over the events of the first quarter we see that prices of big packer hides declined by $6.50, or 12.04%, while prices of cowhides finished $10.75, or 28.86%, lower.
Harvest levels in Q1 were not nearly as large as many pundits had been expecting. For the record, although we did see 141,000 more head of cattle harvested this year versus last year, 104,000 head, or 73.75%, of the increase was cows/bulls.
Another important change in the hide market is the fact we saw the number of outstanding sales of wet salted hides start the quarter at 3,314,900 hides, only to end the quarter at 2,740,300 hides, a decline of roughly 600,000 hides. This indicates, without a doubt, that producers saw their sold forward positions erode during the quarter.
As to our thoughts on offers this week, we are of the opinion it is a tale of two markets. We suspect packers will continue their efforts to convey a message they are well sold and try to hold prices as close to steady as possible. This comes despite several reports towards the end of last week that some packers were starting to develop some fractures in their armour.
Meanwhile, we are not aware of any producer who is enjoying themselves selling cowhides. This, coupled with speculation that there are still a number of producers who have more than ample unsold hides for sale and reports that other cowhide producers from around the globe also have large unsold inventories, is likely to make for another difficult week of trading.
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