US Perspective - 14.08.12
14/08/2012
www.themaxfieldreport.com
The ideas of buyers and sellers appear not to have found common ground last week, as sellers who were pushing for more money on new business met plenty of resistance from tanners who bristled at the thought of paying even more money resulting in only limited sales last week.
Also contributing to the lack of sales was the fact that sellers in general had only limited offers of hides and it appears this resulted in a lacklustre week of trading. The few hides that exchanged hands last week did so at steady to slightly higher levels with sources saying HNS were sold as high as $94 delivered, while we also know of sales of HTS and BBS at levels of $92.50-$93, while sales on Jumbo HTS flirted with the $100 delivered level. Meanwhile, BS appear to have sold close to levels of $91.50-$92, while even CBS broached the $90 level as we are aware of sales at $90 delivered.
There was at least one sale of packer material at the start of this week as we have lighter-weight BBS reported trading at $85.
Something else we find interesting is that in spite of the fact that prices of wet-salted hides are approaching levels we last saw in the second half of February and first half of March, there continue to be plenty of wet blue hides for sale. This is a stark contrast to earlier this year when wet-blue hides were obtaining premiums as high as $16-$17 versus wet salted hides, whereas recently we are told that wet blue hides are struggling to trade at levels $14 over cured hides.
We bring this up because if buyers were as “hard-pressed” for material as many pundits are claiming, one would think in a “pinch” buyers would begrudgingly welcome the opportunity to buy wet blue hides. However, this is not the case and it is almost as if wet blue hides are preventing the market from moving higher.
In addition, we are hearing plenty of concerns over the cash flows of tanners, leading to numerous reports of slow letters of credit openings and a few isolated requests to delay shipments of hides priced well under today’s trading levels. That is why we will be very interested to hear the reports of those traveling, as well as view their offer lists over the course of the next couple of weeks as sellers finally meet buyers face-to-face.
Although it appears rather easy for packers and processors to sell wet-salted hides, attempting to move wet blue hides, especially in volume, is no easy task. Of course, producers of wet blue will point to the fact that they have enjoyed three impressive weeks of sales with an average weekly sale of nearly 200,000 hides on a weekly basis. The problem for those producing wet blue hides is that the average weekly production is close to 185,000 hides and even though producers enjoyed three decent weeks of sales, there are still plenty of wet blue hides for sales in the US.
As to what we look for in the rest of this week, we know of several people who will depart for Asia in order to meet with their customers prior to the start of the All China Leather Exhibition (September 4). This is coupled with the likelihood that we will see a decrease in slaughter numbers this week as packers saw their margins drop from single digits in the black to double-digit per-head losses and this is likely to result in minimal if any offers this week; sellers will look to reserve offers for those travelling.
In the meantime, sellers continue to insist they have strong sold forward positions; however, last week’s outstanding sales number on the USDA Export Sales Report at 2.88 million hides is the lowest number we have seen in the last seven years and certainly is a direct contrast to claims of possessing a strong sold forward position.
This week historically marks the start of the fall cow run; however, we have heard from a number of pundits who are of the opinion that if there is an increase in the cow slaughter over the course of the next few weeks it will be minimal at best.
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