US Perspective—04.12.12
04/12/2012
www.themaxfieldreport.com
Last week saw packers reluctant to offer wet-salted hides to the market citing strong sold-forward positions. We were aware of a few isolated offers of Jumbo steers and wet blue hides, while buyers with any aspiration of buying wet-salted hides below the last established trading levels, or in volume, found packers unresponsive.
Popular opinion in the trade is that it is likely that packers failed to liquidate their slaughter last week, while the sentiment is that prices on the few hides trading hands were no worse than steady, if not incrementally higher. Meanwhile, trading levels set new all-time records last week, as we heard of sales of BBS as high as $98 delivered in limited quantities, while there are unconfirmed rumours that Korean tanners paid as much as $99 at the end of last week. Trading levels on HTS last week reached as high as $96.50-$97 delivered according to sources in limited volumes, while BS traded at levels as high as $95-$95.50 delivered, according to sources.
In the meantime, there are unconfirmed rumours rumbling through the trade accusing some sellers of forcing the hands of buyers and requesting that buyers allow them to ship their contracts out of order and ship some of their more expensive contracts before less expensive older contracts. Other unconfirmed rumours claim some tanners in Korea are pushing sellers to ship their outstanding contracts as soon as possible.
It is not certain if this is because tanners are close to running out of hides, or if tanners are simply attempting to avoid winter damage considering the cost of hides today. A couple of other rumours we have heard are accusing a handful of traders of playing games with offers last week. While the final rumour that is being passed through the trade claims tanners have sent letters to their customers advising them that they will need a $0.20 increase in leather prices in order to conclude new leather orders attributed to hide prices that are at all-time record levels.
Reports from members of the cowhide trade suggest that although sellers were able to eke out additional increases in prices last week, they admitted it was not easy. Overall, as mentioned above, it is widely agreed that volumes traded this past week will likely not exceed the slaughter, leading some members of the trade to start questioning if cowhides may have reached the top-end of the trading range.
Attempting to look ahead as to what we are looking for this week, we highly doubt if we will see packers offer many of tanners’ favourite types of hides, such as HTS, BBS or BS. In the meantime, hide weights are running higher than normal for this time of year. Packers are making their best efforts to try to balance their production; however, with forecasts that cattle supplies will become even tighter in the first quarter of 2013, packers in general are very cautious not to over-sell their heavier weight selections as they have their regular weight selections too.
Although we recognise that some producers of wet blue hides may not agree, we continue to hear from members of the trade that there are more than ample offers of wet blue in the marketplace. The good news for producers is that ideas from buyers have improved from levels of a few weeks ago, when some producers were selling wet blue steers at levels that were not $10 higher than the selling price of wet-salted hides. In the meantime, it will be interesting to monitor the cowhide market this week, especially considering that there appear to be more than adequate supplies of less expensive Brazilian wet blue and crust for sale in the marketplace. This opinion has come about as a direct result of one of the major meatpackers reopening six slaughter plants that had been closed, while it is also speculated that current leather orders appear geared towards better-quality hides.
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