US Perspective - 06.03.12
06/03/2012
www.themaxfieldreport.com
Reports from the big packer trade claim the “feeding frenzy” of interest earlier this week slowed as the week ended. Overall, popular opinion of the trade is that there has been a moderate number of hides exchanging hands this week at levels anywhere from $2-$3 higher, depending on the selection and weight averages.
HTS traded at levels as high as $92 delivered Korea according to sources, with sale of HNS checking in at levels a dollar higher. Reports from the cowhide trade claim the market was very active this week with sellers enjoying numerous bids. Sales levels appear as if HNDC were sold at $80.00, HNC at $70.00 and HBC were sold at $60.00 (all prices delivered Asia).
Popular opinion is that it is likely we will see sellers attempt to raise prices next week by the same increments achieved this week.
THE LOOK AHEAD
As the week ended, we sat on the balcony of our hotel room in Cancun overlooking the pool, tanner than we arrived, while having our fill of fun, tequila, and crevasses. During the course of the week, we saw sellers interesting enough have a few more hides to offer, in spite of slaughter levels than have been running on the average the past 5-6 weeks 6-7% lower than levels of a year ago. Meanwhile, it also appears that buyers have begrudgingly come to accept the fact that there are simply not enough hides to go around and we understand from a number of sources that this week there was much more broad based inquiries from tanners versus the past 2-3 weeks.
The consensus of the trade as we go to press is that sellers easily sold all of the hides they desired this week and many sellers are laying claims they could have easily sold more. As far as prices, we would call trading levels up easily $2 if not $3, depending on the selection and the weight average, and the sentiment of the trade is that it is likely we could see additional increases on hide prices again next week.
In the meantime, although we recognise that hide prices are following levels of a year ago and this has many members of the trade expressing some genuine concern, we would like to take this opportunity to share a comment from one of our members that, although simple, summed up the market in our opinion. The comment simply put was: “If there was not demand, regardless of how many animals we were not slaughtering, we would not see a change in prices”.
At the end of the day, we all heard the claims by tanners toward the end of 2011 and start of 2012 that leather orders were down 20%; however, considering things, it is appearing as if these “reductions” in order may have been a bit overstated by tanners. In the meantime, popular opinion of the trade was it was likely we would see a reduction in slaughter numbers the first quarter of 2012; however, we are not aware of any pundit predicting we would see a decrease in the slaughter in excess of 6%.
Looking ahead to next week, we are only two weeks away from several members of the trade departing to travel Asia prior to the APLF Fair at the end of the month and we tend to suspect those travelling will want hides to sell. In the meantime, with live cattle prices threatening to exceed the 130 per hundredweight level this week, it is likely to curb any enthusiasm packers had to slaughter more cattle next week, leaving us to look for offers to remain limited, while we expect sellers to keep upward pressure on prices.
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