US Perspective—27.11.12
27/11/2012
www.themaxfieldreport.com
Last week big packer prices maintained their firm tone, in spite of the fact that packers in general had few if any “official” offers; coupled with the fact much of the US trade was out the last two days of last week on holiday. Popular opinion of the trade is that prices were no worse than steady, while there were rumblings of a few isolated incidents of some packers able to obtain some incremental increases.
Opinions appear mixed as to exactly how many hides exchanged hands, as it appears several of the packers had plenty of unsolicited bids to choose from, while many of the trades reported that they were not nearly as fortunate. At the end of the day, considering the sold forward position of most packers and the fact that last week was a holiday-shortened slaughter, there really were not that many hides for packers to sell. Sources share that the best ideas on HTS and BBS last week were coming in at $97-$97.50 delivered to Asia, while ideas on HNS were as high as $98 and thoughts on BS at levels around $95-$96.
Worth noting is that although sellers have been able to command some rather “fancy” prices over the past two or three weeks and hide prices are now at all-time record levels, we have heard from several sources that the number of buyers in the market each week continues to dwindle. In the meantime, those in the US producing wet blue hides claim to be enjoying better than expected interest in the past couple of weeks. This has resulted in some producers sharing that they have been able to pass low-ball ideas from tanners looking for bargains. However, with popular opinion of the trade, there are still possibilities to buy product in volume for fairly quick shipment, we believe this will prevent producers from being able to obtain any appreciable increases for the moment.
As we start a new week of trading, we do not see any real reason as to why sellers cannot continue to ride the wave of momentum they have been riding the past several weeks. We are hearing rumours that several of the packers will only work many of their plants four days this week and if correct, we could see a slaughter level that will struggle to exceed 600,000 head. This coupled with sellers possessing a strong sold-forward position does not bode well for short-bought tanners.
In the meantime, we find it interesting that several sources have mentioned to us over the course of the past couple of weeks that they are not seeing as many buyers in the market. We tend to suspect that a number of buyers are attempting to decide whether to continue to chase the market at current levels or perhaps reduce soaking levels, while there is speculation that some tanners in Asia are considering closing for a few days around the Christmas Holidays in order to stretch inventories. At the end of the day, demand from China is clearly driving this market, in spite of the fact automotive demand from Europe and Mexico to a lesser degree is not as robust as three months ago. The question on everyone’s mind is how long before this appetite is satisfied and, once it is, what does the future hold?
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