US Perspective – 20.1.14
20/01/2015
www.themaxfieldreport.com
We are fielding mixed reports from members of the mixed packer trade this week, as we have spoken with some packers who appear pleased with their interest / activity this week, while some traders report that they have not been as fortunate. The consensus is that interest was not as busy as last week and likely will be reflected in USDA’s Export Report that will be delayed one day due to the Martin Luther King Holiday on Monday (19th January).
Overall, sources share that there was no shortage of buyers attempting to bid prices lower than the last reported trading levels; however, as a group, packers refused to concede to the lower ideas of buyers. Meanwhile, we are aware of several packers lobbying for higher prices on a few select selections of hides, especially BBS that appear to have found favour with a number of tanners. This was leading to claims by some producers achieving as much as $103-$105 FOB this past week; however, some of these sales were likely concluded on a delivered basis with a favourable freight point.
Reports from overseas claim that there was decent interest to start the week; however, it appears that once buyers recognised that packers were not in favour of accepting less money, a decent number of bids were withdrawn. Buyers, who needed to replenish their raw stocks, resigned themselves to the fact that they would at least have to pay steady prices and overall, we are not certain if sales will equal the slaughter this week.
As to trading reported today, we can attest to BBS at $102 and Jumbos at $108, while sales of J-BS and SJ-BS both reflect $108. Other trading is calling HNDC $77, while we have HNS at $103 and J-HNS at $108, while we have multiple sales on HTS at $99, while J-HTS check in at $106 and SJ-HTS at $109.
Reports from members of the cowhide trade claim that interest on cowhides at the start of the week was modest at best; however, the vast majority of buyers were looking to try to bid prices lower, while producers as a group were laying claims to decent sold-forward positions and looking for higher prices on some selections. Eventually, with buyers and sellers unable to get on the same page in regards to prices, there was only a limited number of hides trade at levels equal to their last traded levels.
Overall, popular opinion is that as far as the number of hides sold, it is likely that it will fall short of the number of hides produced, while in regards to prices, the consensus is that prices obtained were no worse than steady.
In regards to sales, we were able to muster a handful of sales with trading on HBC in the north reflecting levels of $58, while sales of processor HTS check in at $96. Other trading is calling HNDC at $77, while we also have a sale on HBC in the south at $56.50.
THE LOOK AHEAD
We have come to the end of another week of trading and it appears the market has defied the expectations of those looking for further concessions in prices and ends the week on a steady tone. Overall, producers appeared to have a much firmer posture this week and those looking for additional price concession found sellers unwilling to compromise. Meanwhile, sellers looking to advance prices higher also found their fair share of resistance, with the exception of those selling BBS as it appears there are a number of tanners pressing to buy as many BBS as possible.
That said, we tend to agree with pundits that the market appears to have found a trading plateau. This plateau has allowed a number of producers to collect letters of credit on some of their more expensive outstanding orders that they were concerned about. Meanwhile, over the course of the past few weeks, several of the producers have been to improve their sold-forward position, especially considering the sizeable reduction we have seen in the slaughter over the course of the past four weeks (two due to holidays).
As to what we expect for next week, we are not quite ready to agree with pundits who believe that we will see higher prices next week. We do not disagree that there has been a little better interest from tanners the past couple of weeks; however, if interest was that good, we would think tanners who need product and unable to buy wet-salted hides, would be considering some of the unsold wet-blue hides that are still hanging over the market.
That said, we are not hearing of any substantial improvement in leather demand, while there are certainly several economic issues around the world, the weakened euro and labouring Chinese economy to name a couple. This leads us to question if the interest we have seen the past couple of weeks is simply tanners averaging down their raw material costs as a significant improvement in demand.
That is why, for now, we have some very guarded optimism about the market. However, our concern is that with the ability to ship to Asia essentially closed the next couple of weeks, let us see if sellers have as firm a posture at the end of January as they do this afternoon.
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