US Perspective - 17.07.12
17/07/2012
www.themaxfieldreport.com
Last week saw big packer once again forced to ward off the advances of buyers to move prices lower. Packers, who continue to insist they enjoy comfortable sold-forward positions appear as if they continue to be aided by slaughter levels that continue to run about 4.5% below levels of a year ago.
Tanners who started the week with thoughts that they would easily be able to buy steer hides below $90 delivered began bidding at levels of $87-$88 to start the week. However, by mid-week it appears the tanners quickly realised that these ideas were not going to work and quickly improved their ideas. Sources report they were aware of sales at $89-$90 delivered for HTS/BBS and $91 delivered and slightly higher for HNS, while we are also aware of a fair number of heifers trading hands last week at levels of $74 delivered to as high as $76 delivered, depending on branding and weight average.
Some comments that we found particularly interesting last week were claims by some of the packers that they were seeing quite a bit of trader activity. This leads us to wonder if this was indeed traders coming in to cover some of their short sales, as prices have not moved as low as they expected, or if it was traders taking an ownership position on hides before they start to travel to Asia next month prior to the start of the All China Leather Exhibition in Shanghai (September 4-6).
With regard to volumes sold last week, it appears the trade does not agree as to how many big packer hides exchanged hands, and it will certainly be interesting to see this week’s export report.
We were a bit surprised to have some big packer sales reported and can share with our readers that we had sales reported on both lighter weight and heavier weight HNS exchanging hands over the weekend at levels of $85 and supposedly in decent volumes, according to the sellers.
The week started out with sellers for the most part looking for steady levels, while buyers sensing some underlying weakness in the market with rumours of a few larger players aggressively looking to sell hides at the end of the week prior, and came out bidding aggressively lower.
By midweek, we were hearing mixed reports with sources claiming there was undoubtedly pressure on HNDC and HNC. According to sources, sellers were pushing to sell HNDC in a range of $74-$76 depending on origin and were meeting a lot of resistance, while sales ideas on HNC with a “7” as the first number were widely refused by buyers who were aggressively pushing to buy product at levels under $60 FOB, but to no avail. Meanwhile, it appeared interest on HBC was better than most expected, resulting in sources reporting being able to sell HBC at higher levels last week.
Attempting to look ahead to what we expect this week, there is no question we are somewhat surprised by the fact that sellers have been able to navigate the last six weeks of higher slaughter levels in the US with only a meagre decreases in prices. Packer HTS were $84 on June 1 and they closed last week at levels of $83.
In the meantime, we are not sure we are “on-board” with the thoughts of pundits that slaughter levels will follow their seasonal trend and move lower following the 4th of July holiday. We suspect the escalation we have seen in corn prices resulting in prices close to all-time highs is likely to encourage cattle owners to further liquidate the herd.
As far as asking prices this week, we look for sellers to ask no worse than steady, while we would not be terribly shocked if some of the more bullish sellers did not attempt to tack some incremental increases onto prices this week. In the meantime, we still have some very grave concerns as to where demand for leather will come from looking at some of the various macroeconomic situations in Europe, China and to a lesser degree the US; however, for at least the next couple of weeks who can argue with those calling for a firm market?
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