US Perspective - 10.07.12
10/07/2012
www.themaxfieldreport.com
Last week’s activity in the big packer trade saw sellers and buyers unable to agree on prices. Worth noting are reports that many of the packers had voluminous bids at $2-$3 lower than asking prices. It will be interesting to see if packers were able to clear a holiday-shortened week of slaughter last week as we have encountered mixed views as to how many hides were sold last week.
In the meantime, packers continue to boast of comfortable sold-forward positions with some advertising new business for September production. There is no question packers benefited this past week from the shortened week of slaughter for the July 4 (Independence Day) holiday. With regard to prices, official asking prices last week were at $90 delivered or better on most steer selections, while sources report minimal interest, at best, at full asking price. In the meantime, there were numerous reports last week insisting that some packers were selling direct at levels of $89- $89.50 depending on the port and country. This would translate to levels of $82-$83 FOB for HTS or BBS.
Also worth noting are the reports that some packers are forecasting slaughter levels in July to be closer to 620,000 head on a weekly basis, while other pundits (including The Maxfield Report) are expecting slaughter volumes close to 635,000 head on a weekly basis and higher. Reports from members of the cowhide trade appear mixed, disagreeing as to the number of hides that were sold last week. Overall, from our vantage point it appeared that sellers and buyers were not on the same page regarding prices, as sources reported sellers were making their best case to hold prices steady, while buyers had their sights set on bidding prices down in the range of $2-$3, while bidding in volume at these levels. As mentioned above, opinions are mixed as to exactly how many hides changed hands last week. This much we know: there were at least a few buyers who started bidding the market down aggressively and are reported to have improved their ideas by the end of the week, while trading levels were no worse than steady.
? ? The sentiment of the trade is that sellers will likely leave offers unchanged this week, especially on the heels of claims by some that there are still a number of tanners looking for shipment on new business in the next two-to-three weeks. In the meantime, tanners continue to insist they cannot afford current asking prices, but worth noting is that prices of big packer hides are down nearly 7% from their highs earlier this year.
What will be interesting this week is that earning reports will come out over the course of the next week to ten days and it will certainly be interesting to see the financial results of the brands, especially those who have been lobbying tanners for discounts on new leather business citing poor profitability. As to what we expect this week, packers selling wet-salted hides may have an easier time finding enough buyers as it appears demand and supply are close to being in balance, while we continue to hear of excess unsold inventories of wet-blue hides. Leaving us to question if the unsold inventory of wet-blue hides, coupled with reports of slowing demand for finished goods around the globe might weigh a bit heavy on the market. On the other side of the argument, each week it appears there are enough tanners who do not have enough hides, providing sellers with enough confidence to continue to fight for steady prices, leading to hopes that if the market remains steady it will provide for higher prices as we move closer to the All China Leather Exhibition in Shanghai in September.
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