US Perspective—17.04.12
17/04/2012
www.themaxfieldreport.com
The consensus of the trade is that US big packer and cowhides remained fully steady last week, in
spite of numerous attempts from tanners to bid prices lower. Although sellers were able to continue to lay claim to selling hides at levels near their asking prices, there is plenty of speculation by members of the trade about sellers liquidating their weekly production. In fact many members of the trade question if last week’s muted slaughter at 582,000 head was sold completely.
In the meantime, sellers continue to convey to the trade that they possess strong sold-forward positions and to further support these claims, offer-lists shared with the public were not as populated as in the past couple of weeks and were missing many of tanners’ favoured selections. However, there were claims by some members of the trade that some packers, when offering direct to some of their “preferred” customers, included some of the more popular selections. The “big news” last week was the customs investigation in Hebei Province in China. As always, depending on the source, every story is different from the last. What we can confirm is that custom officials investigated several import agents and tanneries in the Hebei Province that specifically utilise the Tianjin port and the focus of the investigation appears mainly on the tanning areas of Wuji and Xinji.
Reputable sources report that officials detained a number of people for questioning at least temporarily and many were released after paying fines, while there were also many innocent parties rounded up by officials as well. Sources report that there are a couple of people still held by the authorities as apparently these individuals are allegedly guilty of misreporting the type of hides and value so as to avoid import tax; they could face some very lengthy jail time. Meanwhile, by the end of the week, things appeared as if they were settling down a bit. The consensus of the trade that the hides involved were European hides and some US cows, while popular opinion of the trade was this should not have much of an impact on either market. However there is no question this activity makes people nervous, resulting in a tendency to withdraw from the market.
We tend to believe increasing concern about growth in China appears to be pushing money to the sidelines or into the short side of commodity futures to start the week. Worth noting is that a few pundits have started to talk about the possibility of a global recession in a few new stories over the weekend and considering what a driving force demand from China has been in hide prices this past couple of years, it is certainly worth monitoring how things progress in China.
We fully expect sellers will not change their mentality this week. We look for offer-lists to remain minimal with sellers laying claims to small slaughter numbers and strong sold-forward positions as reasons for not being able to offer perspective buyers hides. In the meantime, one of the best-kept secrets is that combined sales for the first quarter of 2012 totalled 6,826,000 hides, versus a slaughter of 7,366,000 animals. This 540,000 shortfall is misleading, as it does not account for any hides for the US domestic soak.
Prices in the first half of February made a strong run at equalling the record levels we saw a year ago prior to the APLF exhibition in Hong Kong. However, at the end of the day, prices feel a couple of dollars short, only supporting arguments that the leather business is not as strong as a year ago. This is why we remain of the opinion that the upside to this market is limited at best.
Share this story:
