US Perspective - 26.06.12
26/06/2012
www.themaxfieldreport.com
Members of the big packer trade appear in agreement that last week was a difficult week of trading as the ideas of buyers and sellers seemed a good deal apart.
Packers started the week holding offer prices unchanged with levels of the week before on the heels of decent sales of HTS and BBS late the week of June 11 at levels of $82 FOB. Meanwhile, sources report traders appeared somewhat active last week. Reports claim sales of $89-$89.50 were popular for HTS and BBS, with popular opinion in the trade that this was primarily efforts by traders to allow tanners that have outstanding contracts with traders to average down to $90-$90.50.
Trading levels heard for HNS were as high as $91-$91.50 delivered to China last week, while we had reports of HBH trading in a range of $75-$76 delivered depending to the port; however, worth noting is that there were not as many heifers offered last week.
Meanwhile, there was interest on CBS last week by a few tanners with sales concluded at $78-$79 FOB. Overall, popular opinion of the trade is that packers will be hard pressed to lay claims to selling a week’s worth of production last week, especially with Chinese tanners out for a couple of days last week for the Dragon Boat holiday. Something worth keeping an eye on in our opinion is that the sentiment of the trade is that there are still a fair number of tanners in need of hides. It is also worth noting that many Chinese tanners have shared with sources that new leather orders have been very slow and many tanners have commented that this is the poorest they have seen business in some time.
The above is likely to create an interesting debate between packers and members of the trade. Packers are forecasting that slaughter levels are likely to fall well below seasonal averages for the second half of 2012, and some packers say the decrease will be even more severe than the decrease in numbers we have seen the first half of 2012. Reports from members of the cowhide trade were conflicting last week. We had reports from some sellers claiming a decent amount of interest last week, coupled with claims of selling product at steady levels, with interest on HNDC especially active. Meanwhile, other members of the trade shared that they were not as fortunate and did not see as much interest, which was not positive considering reports were claiming a number of sellers had offer lists last week that were much more populated.
In the meantime, drier than normal conditions over a large part of the Rockies, extending into the Central Plains and Corn Belt is affecting the cow slaughter. The lack of rain, coupled with 15-day forecasts for above-normal temperatures and below-normal precipitation is turning lush pastureland brown and forcing more cows into the slaughter mix than expectations; this is certainly worth monitoring. This in conjunction with reports that Europe has more than its fair share of cowhides to liquidate before the summer holidays there and reports that Brazil has plenty of unsold inventories of wet blue hides is likely to make things very difficult for sellers in the coming weeks.
Looking ahead as to what we expect for the week, we suspect packers will likely offer this week at steady levels compared to last week, continuing to lay claims to strong sold forward positions and no need to chase the lower ideas of buyers. Although this may be true, we would tend to think with slaughter levels running at their highest levels of the year that it would not take long for positions to erode, especially if buyers continue to remain out of the market.
In the meantime, what will happen in the cowhide trade this week is anyone’s guess. Trading levels reported versus rumours of where product traded in volume are dollars apart, making it extremely difficult to quote trading levels accurately. As for offers this week, there is no secret that sellers have cowhides for sale. We look for offers to be plentiful with sellers starting the week with prices unchanged from levels of a week ago, and in some cases in possibly incrementally lower.
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