US Perspective - 31.01.12
US Perspective
Courtesy of the Maxfield Report
www.maxfieldreport.com
Interest on big packer hides slowed towards the end of the week. Opinion in the trade is that higher trading levels, coupled with the fact packers had few if any hides remaining to be sold, detoured buyers still looking for coverage. According to various sources, there were some bids last night from tanners as high as $83 delivered for steer hides; but considering the last reported FOB prices it would be difficult for any but packers themselves to make money at these levels.
Trading levels this week were definitely higher with prices $1-$2 higher depending on the selection. Meanwhile, the consensus of the trade is there were only a modest number of hides that exchanged hands this week. This coupled with reports from packers claiming they will only work four days next week and likely the week after due to poor profitability, is likely to mean there will not be many hides offered the next couple of weeks.
We can confirm a modest amount of trading today led by reports of BBS moving higher with lighter weights at $75 and heavier weights at $76, while we also have a couple of sales on BS with regular weight packer production checking in at $75 and jumbos at $76. Other trading is reflecting sellers obtained more money for CBS with lighter weights at $71 and heavier weights at $72, while we have a sale on HBH at $65.50 and regular weight packer HTS at $76.
Members of the cowhide trade are also claiming interest slowed considerably towards the end of the week, as buyers realising that sellers had no interest in chasing their lower ideas resigned themselves to the fact if they were going to buy hides, there would have to pay more money. Overall, the consensus of the trade is that there were not many hides exchanging hands this week, while popular opinion is that trading levels were roughly fifty cents to a dollar higher across the board depending on the selections.
We were able to round up a few isolated reports of trading led by reports on processor HNDC as high as $66, while we have reports of HNC bringing higher levels with trading at $60. Meanwhile, processors are laying claims to selling their steers at more money today with HTS checking in at levels of $73 and BS at $72.
THE LOOK AHEAD
Sellers definitely have momentum back on their side and it will be very interesting to see how sellers move forward. There is no question that collectively as a group sellers enjoy a strong sold forward position and with the news that slaughter levels will struggle to exceed 600,000 head for the next few weeks, this will only extend their positions even further without even making a sale.
In the meantime, tanners too will have some difficult decisions ahead of them. Fundamentally, leather business is not exhibiting any substantial signs of improvement. However, with the number of animals being slaughtered trailing seasonal levels in the US, Brazil, Europe and Australia, tanners who need to replenish their inventories may have no choice but to begrudgingly agree to pay even more for hides in the coming weeks – if they can sway sellers to offer.
Something to keep in mind, we continue to hear that the number of natives in the slaughter mix remains at unseasonably low levels, while the number of heifers coming to slaughter continues to decline as cattle owners are holding females back. In addition, as typical for this time of year, as fair number of heavier heifers slaughtered tend to end up in the steers in order to allow packers to average down some of their heavier hides.
As we look ahead to next week, we suspect that sellers in general will have few if any offers and we look for those willing to offer to be very proud of the hides they offer. In the meantime, we suspect many tanners will suffer from “sticker shock” next week and unfortunately, we do not expect this situation to ease anytime in the near future for tanners.
