US Perspective—30.10.12
30/10/2012
www.themaxfieldreport.com
US big packer hides continued their impressive run since the All China Leather Exhibition in early September, as packers were once again able to eke out some incremental gains with prices up approximately $1.25 across the board according to our Big Packer Hide Index. In the meantime, sources report that overall activity did not appear nearly as brisk as the past few weeks, and even packers themselves were admitting that obtaining increases last week was not nearly as easy as in the past several weeks.
At the end of the day, the sentiment of the trade is that it is unlikely packers sold as many hides as in the past two or three weeks. However, considering the sales we saw for the month of October, it is unlikely that a poor week of trading will affect most packers’ strong sold-forward position.
Trading levels achieved last week appear as if some interest on HTS and BBS reached levels of $94.50 delivered and even some unconfirmed claims as high as $95 delivered, while interest on HNS was reported to be coming in as high as $95.50 and even as high as $96 last week in limited volumes. Meanwhile, business for most traders was relatively quiet last week, as offers of only Jumbo steers and a few “hard to sell” selections, kept most traders on the sidelines. We had a few reports of trading filtering in from over the weekend as we have a couple of sales reported on lighter weight BBS ranging from $86-$87, while we also picked up a couple of sales on regular weight packer HTS with sales reflecting a trading range of $86-$87, while we have a processor HTS report at levels of $84.
Reports from the cowhide trade were not much different from those in the big packer trade. Overall, sellers appear as if they were successful pushing prices higher, with trading reflecting an increase of $0.75 across the board as reflected by our TMI Cowhide Index last week. Meanwhile, the consensus of the trade is that interest last week was not nearly as robust as compared to the past couple of weeks, and at the end of the day, it is likely that producers did not liquidate their production last week. As far as trading levels recorded, we have heard of HNDC last week trading in a rage of $73-$75 delivered, depending on origin and weight average, while sales of HNC were reflecting levels of $67-$70 delivered, again depending on origin and weight average. Meanwhile, trading on HBC reflected levels of $59-$61 also dependent on weight average as well as origin. Also worth noting is that the number of bull hides in the slaughter are not as plentiful; this has those chasing bulls regulated to paying more money with sales at levels as high as $74 (FOB) for NB and $64.50 (FOB) for BB last week.
Despite the fact prices defied logic and gravity last week by moving higher yet again, there appears to be a growing sentiment in the trade that we may have finally seen prices peak. Several sources admitted to meeting a considerable amount of resistance last week, and this in turn is leading to speculation that it is likely sellers failed to liquidate their slaughter last week. Worth pointing out is slaughter levels that flirted with falling below 620,000 at the beginning of the month, are running well above forecasts by many of the packers. In the meantime, European slaughter numbers are following their seasonal trend and running at their highest levels of the year, while slaughter numbers in Brazil are running slightly above normal, so at the end of the day, there are a few more hides around than many pundits had been forecasting. This normally would not be much of a problem; however, European hides have been warding off some heavy pressure, especially male hides due to automotive orders taking a steep decline in the 4Q.
Meanwhile, we are hearing that letters of credit are not being opened as expeditiously for sales of Brazilian wet-blue hides sold prior to the ALCE at levels that are now fifteen to twenty cents above current trading levels. There are still a number of unsold wet blue hides hanging around the US. This has led to unconfirmed rumours that some producers are so desperate for sales that they have recently traded wet blue hides at levels that if correct, would be hard-pressed to reflect a $10 premium to where they last sold wet salted hides. That is why considering the above; we too are starting to question if the market might have finally peaked.
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