US Perspective—24.01.12
24/01/2012
www.themaxfieldreport.com
Interest on big packer hides slowed considerably as expected. We heard of a few last-minute attempts from buyers to purchase hides before departing for the Chinese New Year holiday. We also heard reports of some packers who were limiting the number of containers buyers could purchase, even though the buyers were willing to pay full price.
In the meantime, it appears buyers who bought hides this week on a delivered basis expressed interest as high as $82-$82.25 delivered, while we can confirm steers trading in multiple directions as high as $75 FOB. It is unclear exactly how many hides exchanged hands this week; however, if we are to go by the number of hides offered earlier in the week, we would tend to suspect that although packers were successful in obtaining more money, it is questioned if packers cleared their slaughter this week.
With the slower activity, we only have a handful of trades to share, led by reports of regular weight packer BS exchanging hands at steady money at $74. We also have a couple of sales on CBS reflecting more money with lighter weights checking in at $70 and heavier weights at $71, while we have a sale on packer HNDC at $64. The only other trading is a couple of sales on HTS with regular weights reflecting slightly better levels at $75, while Jumbos check in at steady money at $77 and we also have a packer reporting NB at $69.
Net sales of 208,000 wet blues for delivery in 2012 were primarily for China (134,500 unsplit and 2,900 grain splits), Mexico (23,800 grain splits and 100 unsplit), the Dominican Republic (18,000 grain splits), and Vietnam (12,000 unsplit). Decreases were reported for Italy (600 unsplit). Exports of 162,100 hides were primarily for China (75,400 unsplit and 11,600 grain splits), Mexico (23,400 grain splits and 1,100 unsplit), and Italy (19,000 unsplit and 4,900 grain splits).
Net sales of splits totaling 5,313,500 pounds were mainly for South Korea (4,033,300 pounds) and Hong Kong (1,284,900 pounds). Decreases were reported for China (11,800 pounds). Exports of 704,300 pounds were for South Korea (337,700 pounds), China (216,600 pounds), and Hong Kong (150,000 pounds).
We must tip our hat to sellers in the last two or three weeks as they have done a masterful job marketing their hides, placing themselves in a position to obtain more money for their hides.
There have been many reasons bantered around the trade as to how prices have reached current levels, with blame placed on traders forced to cover expiring short positions, or tanners who did not perform on older, more expensive contracts and delaying buying decision having no choice but to participate or run out of hides.
Regardless of the reason why we reached current trading levels, there are still lingering questions if there has been enough business concluded at these higher levels in order to allow sellers to hold the market steady during the week-to-ten-day period for Chinese New Year. In fact, some members of the trade will argue that there has been enough concluded and they believe the market will continue inching its way higher following the holiday in Asia. As of this writing, we remain sceptical, although admit we have softened our stand somewhat after watching the market continue to rise the past few weeks in spite of our thoughts that there was not any gas left in the gas tank. Looking ahead to the next couple of weeks, it will certainly be interesting to see how buyers and sellers react during the holiday in Asia. In the meantime, the two wild cards in the market, in our opinion, are slaughter levels over the next couple of months and, of course, leather demand. Pundits are forecasting that we will see reduced slaughter levels in the coming weeks and with live cattle prices approaching $130 per hundredweight; we can certainly understand this.
Meanwhile, there appears to be a wide range of opinions as to exactly how good the leather business is overseas but unfortunately we will have to wait until we get into the month of February to get a better understanding of what we can expect for demand for the next couple of months.
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