US Perspective - 25.10.11
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Big packer and cow hide prices slipped anywhere from $1-$3 last week depending on the selection, as sellers exhibiting larger than usual show lists lost control of the market last week. Sellers who had been doing an excellent job marketing hides dating back all the way to earlier this spring, appear to have panicked a bit last week and once the ice was broken (lower prices) it appeared all sellers joined the fray.
The good news for sellers is that it appears there was broad-based interest last week and according to the various sources we have spoken with, most pundits are of the opinion there were a fair number of hides sold last week at the lower levels.
Meanwhile we have a report from one of our US members who travelled to Bologna and decided to make an unscheduled stop in China in order to get a first-hand account of what is going on. According to his report, things in China are very tough. He is able to confirm multiple packers selling wet-slated HTS (60/62) in China last week at levels of $84 delivered for prompt shipment.
He reports he is hearing numerous claims by several tanners on higher priced products that have recently been delivered, while there are numerous reports of traders concluding business at very aggressive levels, which we believe is happening so that the buyer agrees to open L/C’s on outstanding orders that are priced anywhere from $90-$94 delivered.
He has encountered a handful of customers willing to offer $84 delivered for steers for December delivery; however, if you mention January delivery, their price ideas drop to $81 delivered. Meanwhile, he shares he has been contacted by tanners in Thailand and some in Taiwan requesting to delay shipment of their outstanding orders citing the heavy rains and subsequent flooding.
Meanwhile, other sources in Asia are saying that many tanners are reporting their order situation this year is very different from a year ago. Unfortunately for tanners, this situation is not expected to improve anytime soon. In the meantime, sources say many tanners are looking to keep only minimal inventories and as of this writing, tanners have absolutely no interest in speculating on new business, especially with rumours that many of the major brands are looking for some “hefty” decreases on new leather business. This has many tanners opting to significantly reduce their soaking levels, rather than lock in a loss.
The look ahead
It is difficult to believe that sellers collectively lost control of the market in such a short period. We are of the opinion there were incidents of panicked selling last week and it will be interesting this week to see if sellers were able to “shore-up” some of their ailing sold forward positions. In the meantime, there are plenty of rumours swirling through the trade and we will do our absolute steady best to decipher which are rumours and which reports have some credibility to them.
As to what we expect this week, we look for a large sales number on this week’s USDA Export Report. That said, the question will be whether sellers collectively sell enough hides to stem the decline we have seen on prices, or whether buyers will once again have their way and push hides lower. In the meantime, naysayers are certainly attempting to exert their opinions of this market, claiming this is only the start of what is to come and comparing things to 2008.
