US Perspective - 2.6.15
Courtesy of The Maxfield Report
Reports from various members of the big packer trade claim last week for the most part was a week where those selling hides spent much more time attempting to bring a resolve to their problems than concluding new business. Various sources shared that much of their time was spent on obtaining letters of credits (L/Cs) from customers on outstanding contracts, while we have even heard of some tanners struggling to open L/Cs on product recently purchased as the new lending requirements by Chinese banks are hampering cashflows.
In the meantime, numerous shoe-upper tanners are laying claims that business is substantially slower than levels of a year ago, with some claims as much as 30% lower, while we are hearing reports from some automotive tanners that they are starting to have requests to slow down versus levels of a year ago. Meanwhile, sources report many tanners have high levels of raw stock and this too is why interest out of China not as robust as many were expecting for this time of year.
As to trading levels last week, prices were steady to slightly softer as we have sales on HNS ranging from $95-$97, while BBS sold at $93-$95, while trading on CBS reflects levels around $81. There was a wide range of trading on heifers, as sales on HNH ranged from $70-$72, while sales on HBH ranged from $68-$70. Overall, popular opinion of the trade is that packers likely did not clear even a holiday-shortened week of slaughter.
Reports from members of the cowhide trade are similar to those in the big packer trade. Overall, last week was a sluggish week of interest from perspective buyers, as it does not appear as if buyers have any sense of urgency. Meanwhile, the pollution problems in Northern China continue to wreak havoc in the market.
Elsewhere, numerous reports of sellers spending more time attempting to resolve pending problems than selling hides last week and all of the above are leading to thoughts that sellers likely did not liquidate a shortened week of slaughter last week. In regards to trading levels, HTS and BS sold around $80-$81, while sales on HNDC hovered around $71-$72. Elsewhere, HNC sold at levels close to $62, while sales on HBC (N) were around $59.
THE LOOK AHEAD
As to what we expect this week, we tend to believe the market is starting with underlying pressure and with expectations that slaughter volumes will run somewhere in the range of 575,000-600,000 head the next five weeks, in our mind the pressure will be on producers to keep product moving. The question is: Will sellers recognise the underlying pressure in the market and be a bit more willing to negotiate prices?
Meanwhile, we are not hearing any reports out of Asia to lead us to suspect there is any change in the overall situation. We continue to hear drop splits remain a huge problem for tanners coupled with new leather orders that are anywhere from $0.20-$0.30 / sq. ft. lower than a year ago. In addition, we are hearing reports producers from other parts of the globe are pressing for voluminous type business and we remain of the opinion if we were a seller, we would continue to sell into this market.
