US Perspective—29.01.13
29/01/2013
www.themaxfieldreport.com
Last week saw the US big packer market start out on a slow foot. Offers from packers were minimal, while for the most part asking prices were higher than the week prior, with packers continuing to insist that strong sold-forward positions and lower slaughter levels were the reason for the general lack of offers.
A number of sources confirmed that interest or inquiries from prospective buyers last week were not nearly as brisk as over the past several weeks. Some attributed this to the pending Chinese New Year holiday in mid-February, while others were starting to wonder if perhaps tanners were finally satisfying what appears to have been an insatiable appetite the past two or three months.
Last week saw trading levels as high as $104-$105 for HNS and $103-$104 for BBS, both on a delivered basis, while sources claim that HTS sold in a range of $102-$103 delivered, with all of the higher prices attached to sales with a stale bill of lading. Meanwhile, there are unconfirmed rumours of one of the packers supposedly willing to sell at $100 delivered with stories that they were struggling to obtain timely letter-of-credit openings. Overall, popular opinion is that it is highly unlikely that packers sold a week’s worth of production, even though last week’s slaughter was only 625,000 head.
Reports from members of the cowhide trade also claim it was a sluggish week of trading on cow and bull hides last week. Sources share that there were still a few isolated buyers still looking for HNDC and this allowed sellers to move prices of this selection higher, while interest on other hide types certainly was less than in the past few weeks. The good news for producers is that interest on bull hides still appears to be decent and with supplies appearing somewhat limited, the perception of the trade is that there still might be some upside potential here.
The Chinese Lunar New Year Holidays are nearly upon us. We are already aware of a number of tanners who started winding down activities at their facilities towards the end of last week, while those tanners still operating this week will likely start to wind down activities at their tanneries by mid-week. This is leading to perceptions by members of the trade that if there is any interest in buying this week, it is likely to happened early in the week.
Overall, we would be surprised if we saw much interest this week from Asia and even though speculation is that sellers collectively as a group failed to liquidate their production last week, we doubt failing to do so again this week will pose much of a problem, as most possess stronger than average sold-forward positions. At the end of the day, this break in activity is more likely to stem the steady rise we have seen on prices each week and this is why we look for prices to remain steady this week on limited volumes.
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