US Perspective - 03.07.12
03/07/2012
www.themaxfieldreport.com
Packers started last week with designs on holding prices steady with trading levels of the week prior, which for the most part translated to trading levels of $90 delivered or higher for steer hides. The steady or slightly firmer asking prices coincided with Chinese domestic tanners not expressing much interest last week; we are hearing more and more reports claiming leather orders for both shoe-makers and upholstery tanners are noticeably slower than a couple of months ago. All of the above resulted in a lacklustre week of trading, leading to speculation that it is highly unlikely packers were able to liquidate the largest slaughter of the year (653,000 head) last week.
With regard to trading levels, sources report they are aware of sales taking place at levels of $89-$89.50 delivered for HTS ($82 FOB), $88-$88.50 delivered for BS ($81 FOB) and $89.50-$90 for HNS ($83 FOB). We have packers reporting that they were able to find some isolated interest on HTS as high as $83, while we have reports from trades that they paid as little as $82 late Friday afternoon on packer HTS. Meanwhile, we also have a processor report laying claims to selling HTS at levels of $79 this weekend.
Reports from the cowhide trade indicate a stagnant week of trading. Sources started the week with asking prices that were steady with the week prior, while the consensus of the trade is that there were a few more hides for sale last week. Overall, the majority of sources we spoke with claimed last week was a difficult week of trading as buyers and sellers could not agree on prices. We heard reports from numerous sources claiming there was more than modest interest on hides at $2-$3 below asking prices. Worth noting is that towards the end of the week it appeared a few sellers succumbed to lower ideas of buyers and we are aware of trading levels ranging $1-$1.50 below asking prices, while the number of hides exchanging hands is believed to be lower than the number of hides produced last week.
Expectations by members of the big packer trade are leaning toward the opinion that the stalemate between buyers and sellers will continue this week, especially with the 4th of July holiday in the middle of the week. Opinions by various pundits believe packers will likely not be in a hurry to offer this week, especially with the slaughter shortened by the holiday. Meanwhile, buyers who saw a little relief in prices at the end of last week are hoping this is the start of a steady decline in prices.
We have heard from some major tanners who report their business is down double-digits from levels of a year ago, resulting in most moving forward cautiously and only buying hand-to-mouth. Meanwhile, other major tanners share that they are enjoying strong demand for leather and have orders that exceed levels of a year ago and this is reflected in the number of hides they have been buying. The number of cows coming to slaughter is on the rise due to drought-type conditions in most of the Northern part of the US. This is keeping pressure on sellers to sell into the market. This is coupled with plenty of unsold inventories in Europe and reports of more than enough unsold inventories of wet-blue and crust in Brazil, not to mention reports that grading on fed-cattle hides has been below normal for the past several months. This is resulting in a bit of a back-log in the market of lower-quality hides.
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