US Perspective - 24.9.19
24/09/2019
www.themaxfieldreport.com
Last week saw a mixed bag of offers from the various packers, as some either refrained from publishing offers or only had a limited number of selections for sale.
A couple of the larger packers had offer lists that were fairly populated, with sources claiming one packer in particular had a full complement of selections for sale.
Pundits think many of the packers were refraining from offering because they were focusing on liquidating their outstanding orders to Chinese customers to ensure the hides arrive before December, when we will see tariffs increase, unless the Chinese and US governments come to an agreement or a delay is announced.
Most of the packers were content on leaving asking prices unchanged, thoughts by some of pushing for higher prices have eased, at least for now.
As to shipping times, some selections were available a bit earlier than a couple of weeks ago, while shipping times on all other selections remain unchanged.
We are not aware of any of the producer laying claims to experiencing a substantial amount of interest, as we understand that if producers were willing to consider trading levels $2-$3 under their asking prices, there was an opportunity to sell a fair number of hides.
However, with packers looking to trade at levels as close to steady as possible, it appears many buyers were willing to put their interest on hold and wait again until this week.
Overall, is that it is highly unlikely we saw packers liquidate their production and harvest levels returned to numbers north of 650,000 head. Trading levels were no better than steady, while it appeared that traders were much more aggressive last week and willing to sell at lower levels.
Reports from members of the cowhide trade claim despite what appeared to be a decent week of sales the week prior, we continued to see producers with offer lists that were fairly populated. According to sources, most producers had a full complement of selections for sale, with selections, especially HBC and HNC, available for prompt shipment.
Most producers opted to leave asking prices unchanged with the past few weeks, preferring to counter bids.
Similar to big packer hides, most prices were $2-$3 lower with sellers reluctant to consider such discounts, although producers were willing to negotiate.
Overall, last week was not a particularly busy week of trading, and it is highly unlikely producers liquidated their weekly production, which continues to run 2-3% higher than levels of a year ago.
We are calling prices a very soft steady, as it is not an easy task to obtain steady prices, especially if sellers are looking for any more than limited volumes.
THE LOOK AHEAD
As to some initial thoughts for this week, last Friday we saw the release of the USDA monthly Cattle on Feed Report and the number of cattle on feed in the nation's feed yards fell from a year ago. This is the first time we have seen this in several years.
According to Friday’s reports, placements fell short of pre-release estimates by 3%, while marketing estimates were in line with expectations.
All industry participants will be watching the September and October placements for signs of bunching, while October is seasonally and normally the largest placement month of the year.
The report on Friday was considered “friendly”, lending support to the argument we should see harvest numbers ease in 2020.
Although we saw a decent USDA Export Report last week, we think the report was a bit “skewed” due to travel the week prior and week of the All China Leather Exhibition (ALCE) at the beginning of the month.
The sales numbers contained a fair number of sales concluded while members of the trade are travelling and likely we see a report this week more in line with the several weeks prior.
What will be interesting to monitor are opinions that many producers are focused on liquidating their outstanding sales to China and because of this, it could possibly “delay” offers again this week, as producers want to be sure that everything they have sold to China does not incur any problems with the possibility of higher tariff rates come December.
That said, in the next ten days to two weeks we will see offer lists grow substantially, once outstanding orders are liquidated.
One other thing worth keeping an eye on are cattle weights. Reports claim cattle entering the feedyard are heavier than a year ago and with night-time temperatures following their usual seasonal pattern, cattle will develop their winter coats. With cattle already at heavier weights, we could see a situation where regular weights could be a bit dearer and the premium we currently see on heavier weight hides erode quickly.
Share this story:
