US Perspective - 07.08.12
07/08/2012
www.themaxfieldreport.com
The consensus of members of the big packer trade is that it appears packers enjoyed another successful week of sales last week. Although popular opinion says quantities sold may have lacked any significant volume, some of which could be attributed to the fact that many packers rescinded their offers towards the end of last week, it is clear that packers were successful in moving prices higher.
What we found intriguing was the opinion that it was likely Asian tanners would attempt to stay out of the market to avoid chasing prices higher, following a couple of weeks of decent sales. However, immediately following packers releasing their offers, it was apparent there were still a number of tanners who were short-bought and packers had no problem concluding new business at their higher asking prices.
Overall, the trade appears in agreement that it is doubtful packers sold a week’s worth of production last week. However, considering the comfortable sold-forward position of most packers, we do not see this as an issue. The only obstacles we see for packers this week is those who produce wet-blue hides still appear as if they have more than enough hides for sale, although it is agreed producers have put one heck of a dent in their unsold inventories of wet-blue hides in the past two to three weeks.
Meanwhile, the other situation worth monitoring is the financial conditions of tanners, as we understand the tighter lending requirements in Asia, coupled with reports of slow payments from shoemakers and hide prices that are once again approaching record levels, are making things extremely uncomfortable.
Reports from members of the cowhide trade are similar to those in the big packer market. For the most part, we heard from sellers that they too enjoyed a decent week of interest considering most had only a minimal numbers of hides to offer as most sellers are comfortably sold forward. This, coupled with a declining cow slaughter, allowed most to obtain more money for their hides last week.
Looking ahead to this week, there is no question that frustration levels for tanners are peaking, as escalating hide prices, coupled with slow payments from shoemakers and stricter lending requirements, have most wondering how the hide market can be so strong. With slaughter levels continuing to run in the region of 4.5% lower than levels of a year ago and the appearance as if there are still a number of tanners who have below-normal levels of raw stock, the likelihood of hide prices slipping lower prior to the All China Leather Exhibition in September is doubtful.
Meanwhile, as prices continue to inch towards highs, we suspect sellers will be moving forward cautiously and will be unlikely to accept business with any new customers in the near term. Tanners appear as if they are in a tricky position as it is very difficult if you are a hide buyer to gamble and purchase a large volume of hides at today’s prices. However, as we look at the calendar and understanding tanners’ desire for end-of-the-summer hides, the clock is ticking.
This week, we suspect offers will likely be at a minimum; however, it would be a surprise if the price were higher than their last reported levels.
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