US Perspective - 25.8.20
Courtesy of The Maxfield Report
www.themaxfieldreport.com
There appeared to be quite a bit of “me too” type interest last week and after the release of the weekly USDA Export Sales Report last Thursday, we can understand why as there were a fair number of hides traded the week before last. That said, it certainly appears as if the packers continue to parlay better-than-expected interest on hides into higher trading levels the past 2-3 weeks.
Last week was a decent week of sales for most producers; and although we are not aware of many sellers complaining about sales, it is unlikely that this week’s Export Sales Report will be as large as the one we saw last week.
Most prices were easily up a dollar across the board and in some instances more than a dollar.
In the cowhide trade, offer lists were a bit of a mixed bag last week, as some producers reduced the number of selections available for sale, while other producers left selections alone. Producers enjoyed some better interest the past couple of weeks, which encouraged most to attempt to raise their asking prices.
Things got off to a bit of a sluggish start but by the middle of the week, bids improved although buyers were not enamoured with efforts by producers to raise prices.
Producers were able to increase trading levels by roughly a dollar across the board, but there might not have been as many hides sold as the week prior.
THE LOOK AHEAD
This is the first day back from vacation, but based on the activity from the past couple of weeks and recent conversations, producers have momentum on their side and appear as if they are in control of the market.
That said, last Friday’s Cattle on Feed Report was interpreted as bearish by most pundits. Hot and dry weather in much of the country pushed cattle to the feed yards in July, possibly lightening the number of cattle to come this autumn.
Meanwhile, placements caught the attention of most, as the actual number of 111% was well over the pre-release guesses of 106. As a result, futures traders sensed a surprise and sold futures in anticipation of a disappointing report.
Although the report was bearish, the distribution of weights appeared to be a bit more positive. In addition, lower corn prices have set the stage for lighter weight placements - the heaviest weight categories were down last month, while lighter weight classes were larger. This is good news for cattle producers as these can be marketed over a longer period of time, while August is likely to continue the pattern for larger placements.
Despite harvest numbers trailing last year by more than a million head of cattle, cattle owners posted their sixth straight increase in live prices. Obviously, we are in some unprecedented times, but six straight weeks of price increases for live cattle when we are a million head behind last year does not make a whole lot of sense.
As to offer lists this week, producers will likely continue to limit the number of hides they are willing to show, while recognising that we are “knocking” large numbers of cattle (although last week’s 652,000 head is still lower than last year’s 657,000 head). That said, we suspect we will continue to see sellers test the most recent highs, especially with demand appearing as if it is better than most were expecting. In addition, European tanners will be back to work next week and that should be a boost to the market as well.
