US Perspective—16.10.12
16/10/2012
www.themaxfieldreport.com
The US big packer market exhibited some lofty gains last week, with prices reflecting increases ranging from a dollar to as much as two dollars, depending on the selection. Sources report that it appears new leather business is geared towards better quality hides and this is keeping those tanners involved in the market and with availabilities limited, no chance to buy product lower. With regard to trading levels last week, sources share that HTS and BBS sold easily at levels as high as $93.50 at the beginning of the week, while bringing levels as high $94 delivered toward the end of the week before packers rescinded their offers. As to exactly how many hides exchanged hands last week at the higher levels, there appears to be some difference of opinion and it will be interesting to see what this week’s USDA export report reflects.
The other interesting point worth noting is that, considering packers’ claims to comfortable sold forward positions, coupled with forecasts that slaughter levels would remain well below seasonal for the remainder of the calendar year, there are concerns about hide availability. This has forced some tanners into the market in order to ensure they have adequate coverage leading up to the point of the Lunar New Year (February 10, 2013). However, this is also leading to questions as to what we can expect for demand and shipments after the Lunar New Year holiday.
Members of the cowhide trade report a decent week of trading last week and this in turn allowed producers to obtain some appreciable increases on all cow selections across the board. We have heard from a few isolated members of the trade that they are starting to formulate the opinion that the market appears a bit “over-cooked”, supported by news that Brazilian wet blue hide prices succumbed to lower prices last week. Something else worth keeping an eye on are the reports out of Europe that European cowhide prices are under pressure. Sources share that trading levels this past week are ranging anywhere from $2-$3 under their last reported levels.
Sellers enter this week continuing to ride the wave of momentum they have enjoyed for the past several weeks, fuelled by better-than-expected demand from tanners.
As we look ahead to this week, we see no reason for sellers to lower their asking prices and we would not be surprised if a few sellers attempted to raise asking prices on some of their more popular selections. That said, it would be important for sellers to monitor the situation in Europe and Brazil, as we suspect that if prices in these areas of the world move significantly lower, they are suitable substitutes for US hide selections and this could make it difficult for sellers to justify their asking prices. Now as prices are flirting with their all-time record levels, it certainly is difficult to believe that there is much upside to this market. However, considering the sold forward positions of sellers, coupled with slaughter levels that appear as if they will continue to run close to 4.5% below levels of a year ago, those looking to push prices may have a difficult task in front of them.
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