US Perspective - 04.09.12
04/09/2012
www.themaxfieldreport.com
Members of the big packer trade reported a difficult week of trading last week. Packers who had hopes of attempting to hold prices unchanged with levels of the previous week, found much more resistance than they expected from buyers. In turn, by the middle of the week, many packers begrudgingly resigned themselves to the fact that they were going to have to negotiate their prices if they were going to sell hides. Ideas on HTS and BBS that started the week as high as $92 delivered were met with aggressive ideas, as low as $88-$89 from some buyers. Meanwhile, other sources report that they heard of sales in China as low as $90 on HTS and BBS, while information from Korea claim tanners there had no interest in paying levels of $91 delivered. In the meantime, the consensus of the trade this week is that many of the packers sold HTS initially at levels of $84 FOB early this week and then were freely selling them at $83 FOB by week’s end. Opinions of the trade appear mixed as to how many hides changed hands this week; however, we tend to believe that many of the packers were making their best efforts to attach at least some modest volumes to sales this week, especially if they had to accept lower trading levels. We were able to round up a few reports of trading this afternoon as we have heavier weight BBS selling as high as $86 with questions by the trade if this level could be duplicated in multiple directions and in volume. Meanwhile, we also had sales on regular weight BS reported at $82, while we have a couple of sales on HNH ranging from $73-$75. The only other trading is a sale on heavier weight HNS at levels as high as $87; members of the trade also wondered if this price could be duplicated in volume and in multiple directions, while we also had regular weight HTS checking in at $83.
As we have come to the end of another week of trading, the market certainly has a much different tone at the end August than it did when the month began. Momentum appears as if it is gradually shifting to the side of buyers and prices at the close of the week (with HTS as the benchmark) are down almost 3%, by $2.50, since the middle of the month. In the meantime, sellers as a group (who were laying claims to possessing such strong sold forward positions at the beginning of August) appear to have some fractures developing in these positions. We have heard a number of reports from reliable sources claiming many sellers have been calling customers the past week in order to check and see if any “needed” to ship product earlier than contracted. Looking ahead to this coming week, the trade will be at the All China Leather Exhibition in Shanghai. What is interesting to note is that hide prices are very close to levels of a year ago and this has some members of the trade (mainly buyers) leaning toward the opinion that we will see a repeat of last year when hide prices declined quite considerably during the 4Q, believing history will repeat itself. As of this writing, we are not sure we are ready to go quite this far. First and foremost, slaughter levels in the 4Q of 2012 will be somewhere in the range of 4-5% lower than levels of last year as supplies of bovine animals are tight in many origins of the world that slaughter a significant number of animals.
However, that said, we certainly have a much different economic situation in Europe who many claim is in a recession, while China is not growing nearly at the same pace as a year ago. In the meantime, the US economy is doing no better than sputtering. The above, coupled with the prospect of record meat prices, as well as prices at the grocery store increasing due to corn reaching $8 per bushel, certainly leaves us wondering exactly where demand is going to come from, especially if sellers are going to hold hide prices anywhere close to current trading levels as we move through the 4Q. It will certainly makes the fair in Shanghai very interesting.
Share this story:
