US Perspective—11.10.11
11/10/2011
www.themaxfieldreport.com
First and foremost we would like to offer our sincerest congratulations to Fred Locke, formerly vice-president of hide sales for Tyson Fresh Meats, and Clark Fidler, formerly of the S.W. Hide Company upon being inducted into the United States Hide Hall of Fame at the USHSLA annual convention in Chicago last week.
As far as trading this week, things played out pretty much as the trade expected with things quiet for the first three days with the majority of Asia out on holiday. In the meantime, the trade appeared to be harbouring opinions that if packers were going to sell any hides this week they would have to accept less money. This was confirmed when Asian tanners returned to work from their holidays with lower ideas. Meanwhile, reports from Asia insist many of the packers freely sold HTS this week at levels of $88 delivered, while there are rumours of sales at levels as low as $87 that we could not confirm.
Overall, the sentiment of the trade is that nearly all of the packers were active towards the end of the week and appeared willing to negotiate prices; however, it is doubtful that there was enough interest to allow packers to clear the slaughter this week.
During our travels this week, we had the opportunity to speak with the CEOs, presidents or senior vice-presidents of various shoe and handbag brands, and automotive tanners. Much of the conversation appeared focused on how strong business was for several of these major players the first six months of 2011; however, the common theme appears that business in the third quarter has fallen short of their expectations. The vast majority, if not all, appeared concerned about what the fourth quarter will hold for retail demand, as the financial uncertainties in Europe, interest-rate hikes in China and a US dollar that is rapidly gathering strength, coupled with consumer sentiment in the States that continues to reflect a pessimistic view of the economy, have given reason for concern.
From our vantage point, it appears that those producing wet blue hides in the US are struggling to liquidate their production each week and this is leading to plenty of rumours accusing some of the various producers of holding large quantities of unsold inventories. In the meantime, it appears those willing to sell wet-salted hides direct to tanners are still able to enjoy some decent business, especially from tanners who prefer not to buy wet blue hides.
Looking ahead to this coming week, we remain of the opinion that collectively as a group, sellers do not possess the sold forward possession they are advertising. In the meantime, there are still a lot of uncertainties surrounding the defaults on private loans taking place in Wenzhou (where a leather trading operation failed recently) and we will have to see how this plays out.
Meanwhile, slaughter levels remain at rather healthy levels for this time of year and this is why we remain of the opinion that if we were a seller, we would continue selling into the market, especially to customers we knew had money and were taking delivery.
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