US Perspective—08.11.11
09/11/2011
www.themaxfieldreport.com
Reports from various members of the trade claim interest slowed considerably towards week’s end. We heard several reports claiming the vast majority of buyers took care of their needs earlier in the week and with some packers pressing buyers to pay up, it appears buyers decided to “take their ball and go home”. Popular opinion in the trade on the number of hides sold this week will likely pale in comparison to the week prior and there are some pundits of the opinion packers failed to liquidate their slaughter this week.
We heard a wide range of trading levels, with reports of HTS sold as low as $75 at the start of the week and then quickly moved to levels of $76 by Tuesday. As of Wednesday, the majority of packers were looking for levels as high as $77 and there were a few isolated claims by some packers of selling a few HTS at these levels. With regard to trading levels overseas, the substantial majority of buyers were testing the market at levels of $81-$82 to start the week, but many who needed to buy improved their ideas to levels as high as $83-$84 by mid-week.
It certainly appears from our vantage point that packers have been successful in stemming the recent decline in prices. Meanwhile, popular opinion is that there is still quite a bit of unsold wet blue hides hanging around the market and it is going to take some time for packers to resolve this situation. In the meantime, we have heard that some of the producers of wet-blue hides in the US have reduced their soaking levels and this will certainly help those with product to sell.
Taking a moment to view the landscape of the market, there still appears to be plenty of questions about the liquidity of tanners and especially those tanners with ties to the problems in the Wenzhou area of China. Meanwhile, the rest of the world is closely monitoring the events in Europe, with the euro poised for its biggest weekly loss in almost two months, as Group 20 leaders failed to agree on funding to support European governments’ efforts to contain their debt crisis.
In the meantime, we continue to try to sort out numerous reports from tanners in Asia claiming leather orders are down in the neighbourhood of 20%-30% versus levels of a year ago. In addition, we are hearing that the majority of tanners agreed last month to reduce their outstanding leather contracts by $0.10 per square-foot, and sources are sharing that leather buyers are lobbying hard for decreases of as much as $0.20-$0.30 per square-foot on new business.
It is worth noting that the average combined sales of wet-salted and wet-blue hides for the past eleven weeks is only 568,500 hides per week. This is why we remain of the opinion that packers collectively as a group do not possess the sold forward position they are advertising and why we remain in favour of selling into the market as opposed to holding out for higher prices.
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