US Perspective—18.12.12
18/12/2012
www.themaxfieldreport.com
The big packer hide market has continued its unprecedented march higher. Packers were able to eke out additional price increases, which in turn established new all-time record trading levels. Overall, the sentiment of the trade is that prices reflected increases of roughly a dollar across the board.
Trading levels recorded HNS as high as $100 delivered, while trading on BBS was only a dollar behind at $99 and HTS as high as $98 delivered. We can also attest to sales on BS as high as $97, while trading on CBS reflected levels as high as $95 delivered. Popular opinion of the trade is that it is rather doubtful that sellers sold as many hides as the week prior, which incidentally was the largest sales week of the year, leaving most pundits of the opinion that this week’s US Department of Agriculture Export Report will reflect a much lower week of sales.
Worth noting are continued comments that wet-salted HTS appear as if they continue to suffer quality issues and are grading well below historical levels. This in turn is making HNS and BBS and even BS more desirable to tanners and there are some members of the trade who have shared opinions that they would not be surprised if we saw BS trade at levels equal to HTS in the near future.
Meanwhile, the huge export report last week has several members of the trade questioning the accuracy of the report, while other members of the trade have shared that they know of some large pieces of business concluded over the course of a seven-to-ten day period that was right in the middle of the reporting period. This has more than a few members of the trade questioning how much of the product reported is being held by traders both here in the US and in China. ???? ?
? ? Interest on cowhides was mixed last week, as some producers reported decent interest while others shared that they were not as fortunate. Meanwhile, opinions are that cowhide tanners have better business, especially furniture upholstery tanners. This has resulted in reports of increased inquires on HBC and HNC last week, allowing producers to eke out some incremental increases on HNC. Meanwhile, demand for HNDC last week also exhibited signs of improving, in fact, some producers were asking as much as $80 delivered last week.
This is the last full week of trading for the calendar year as the Christmas holidays will shorten next week’s slaughter, while the week after will be shortened by the New Year holiday. In the meantime, it appears packers will also shorten this week’s slaughter due to poor margins as they attempt to balance the slaughter against beef demand and live cattle prices. The decrease in the slaughter over the course of the next two or three weeks will no doubt extend the position of sellers, while short-bought tanners are not likely to find any sellers willing to negotiate prices. The only redeeming feature is the fact that many tanners will take some time off during the holidays and when they return in early January, sellers will be in “dead time” when they cannot ship to China due to the Chinese New Year (February 10).
We do not look for much of a change this week. We look for sellers to keep offerings limited, while we look for trading levels to be no worse than steady, if not higher again this week. This should mean that it is likely we will see steer levels break the $100 delivered level, while it will be interesting to see if tanners can continue to sway leather buyers to accept price increases on new leather business.
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