US Perspective—02.10.12
02/10/2012
www.themaxfieldreport.com
The consensus of the big packer trade is that packers were able to eke out a few incremental increases last week; however, packers admitted by the end of the week that obtaining higher levels was not as easy as in the past two or three weeks. The good news for packers is that collectively they have been able to recover all of the lost ground leading up to the All China Leather Exhibition in Shanghai at the start of September and have even been able to push prices back close to record levels.
Meanwhile, the trade appears as if it agrees that packers’ efforts to push prices even higher last week sent many buyers to the sidelines and this, coupled with limited offers from packers, led to opinions that packers probably did not move a week’s worth of production last week. Overall trading levels recorded last week saw sales on HNS reach as high as $93-$93.50 delivered, while a few isolated sales on BBS reached levels of $92.5-$93 delivered, HTS at $91.50-$92 delivered and sales of BS peaked as high as $91. Reports claim tanners expressed decent interest last week on all cowhide selections offered last week, with the exception of dairy cows, as it appears supply is still exceeding demand. This allowed many sellers to achieve some incremental increases on HNC and especially HBC as demand for branded cows appears to be outstripping supply. Overall, the trade appears in agreement that it appears sellers moved at least a week’s worth of production if not more, and it will be interesting to see what offers look like this coming, as it is possible we could see plenty of offers of HNDC, a few HNC and possibly no offers of HBC.
Worth noting is that this week Korea is on holiday until late in the week, while Chinese tanners are likely to be out all this week because of the mid-autumn festival. Logically, this should lead to a very quiet week of trading and then when one considers the vast majority of the US trade will gather this Thursday and Friday in Chicago for the annual USHSLA meeting, it is likely there will be little to report this week. In the meantime, sources overseas share that domestic Chinese tanneries continue to complain of poor leather orders, especially in medium- to lower-end business. In addition, there are unconfirmed rumours circulating that many of these tanners have excess inventories of wet-salted hides, wet blue and crust and this could pose a problem, especially if tanners pursuing higher end business slow down as many pundits are predicting for the fourth quarter.
Looking ahead as to what we expect this week, as mentioned above with Asian tanners out part or all of this week for the autumn holidays, we would be shocked if there was much interest this week, especially with sellers’ bullish mindset. In the meantime, it appears that sellers met a lot of resistance from tanners last week in their attempt to push prices higher and by the end of last week we started seeing the first signs of at least a few sellers who might have started to second-guess their efforts on attempting to push prices higher. That said, sellers continue to lay claims of enjoying strong sold-forward positions, so logically one would assume that a quiet week of trading should not be much of a problem.
In the meantime, there are still more than ample wet blue hides for sale in the market place. In turn, this is generating a fair number of unconfirmed rumours of some sellers attempting to quietly conclude volume type business at levels several dollars under their asking prices, which if correct could result in some unexpected pressure on wet-salted prices. However, on the other side of the equation as we enter the month of October, the window of opportunity to buy “end of the summer hides” is slowly closing. One would think even if we are to see a correction in the market, it is doubtful that it will be severe or at a rapid pace, especially with forecast that slaughter levels are likely to struggle to exceed 625,000 head on a weekly basis.
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