US Perspective - 01.11.11
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week was a wild ride for packers as we watched the price of big packer hides decline by several dollars, only to retrace some of their loses by the end of the trading week.
We also saw prices of cowhides decline last week; however, not to the severity of big packer hides and it does not appear as if cowhide prices experienced any kid of rebound at the end of the week. Most sources are calling prices of approximately a couple of dollars across the board, while the sentiment of the trade is that sellers did not liquidate enough hides, especially in light of a 156,000 head slaughter that they can avoid offering this week.
Meanwhile, reports from overseas claim packers sold HTS last week as low as $82 delivered in rather large quantities. In the meantime, we have heard numerous rumours of traders accepting prices as low as $79 delivered as they intend to “mix and match” these sales with their older, more expensive outstanding in order to ensure tanners continue to open their L/Cs.
The good news for sellers are reports of some large tanners attempting to “double up” their recent purchases late last week. They were attempting to buy HTS at levels of $81 delivered but were refused by packers claiming they were sold out. In the meantime, there are plenty of questions surrounding the general orders of tanners. It is clear the majority of tanners do not have as many leather orders as last year, while there are plenty of mixed opinions as to what we can expect for retail business in the fourth quarter with all of the pending questions about the global economy.
Looking ahead to what the week may hold, it appears the consensus of the trade is that it is likely the market has temporarily bottomed. Considering the number of hides that were traded last week, the usual reaction of packers would be to not offer this week and we will have to see how this plays out.
In the meantime, we have heard from sources that there was quite a bit of business that was not concluded last week as it was lower than sellers’ comfort level, and it will be interesting to see if any of these buyers are willing to “pick up the ball’ and try again this week.
For now, there are plenty of questions regarding the liquidity of many Asian tanners, especially in China and we have heard from countless sellers that they are being very selective who they are doing business with. Meanwhile, members of the trade appear very concerned about overall new leather business. Some of those who have travelled for the past couple of weeks report levels for numerous tanners are well below levels of a year ago. Worth noting is whether any tanners are working near capacity and why we have a difficult time following any bullish argument.
