US Perspective—07.05.13
The sentiment of the big packer trade is that prices drifted lower last week, after a slow start to the week due to the May Day holiday. As to the amount of the decline, it appears as if it varied between packers and traders. Overall, popular opinion of the trade is that traders were attempting to lead the market lower last week and most traders appeared willing to negotiate prices, especially for voluminous type bids. Members of the trade claimed packers appeared a bit more reluctant to consider any significant discounts to their last traded levels. This led to beliefs that trading ideas between packers and traders were as much as $2 apart towards the end of last week, while it appears the trade agrees there were enough hides sold last week to clear a week’s worth of production.
According to sources, packers were attempting to secure business on HTS and BBS at levels of $108 delivered and a dollar more for HNS, while it was reported that some traders were much more aggressive taking on business last week on HTS and BBS at levels as low as $106 and HNS at $107. In fact, there were rumours of sales on HTS and BBS as low as $105 that we could not confirm. Meanwhile, there was also a lot more trading on heifers last week as we understand sales on HBH were accepted as low as $92-$93 delivered.
Reports from members of the cowhide trade are also calling prices
lower as the consensus of the trade is that prices slipped at least a
dollar last week for the most part, and on some pieces of isolated
trading, perhaps even further.
In the meantime, several members of
the trade are starting to lean towards the opinions that the
significant increase in the nation’s cow slaughter is starting to
show some signs of wear on the market, leading to speculation that
additional decreases in price are likely, especially with many
tanners reporting a slowdown in domestic leather demand.
Sources
report that sales of HNDC took place in decent quantities last at
levels around $81. Meanwhile, interest on HNC and HBC was not as
decent as HNDC; however, this did not detour sellers from concluding
some business as we have HNC trading at $75 and HBC at $65 by week’s
end.
Attempting to look ahead to what we expect for this week, buyers have
been able to stop the weekly run-up in prices and actually obtain
some incremental decrease in prices the last couple of weeks; it will
certainly set up an interesting week of trading this week. As
mentioned above, it appears traders were the ones leading the market
lower, while packers have been keeping offer lists minimal, while
making their best effort to hold prices steady.
Traditionally, the month of May is not a strong month for leather
demand as this is the traditional slow season for most tanners in
Asia. Meanwhile, May for packers is the time of the year when
slaughter levels start to rise and even though this year may not see
slaughter numbers equal to levels of previous years; we will have
more hides coming at packers that will need to be sold.
That said, we
tend to believe that the sold forward positions of some producers is
not as far forward as a month ago, especially with China taking about
a quarter million less hides in April than they did in March. That
said, we look for offer lists to be a bit more populated this week,
especially from those producing cowhides, as the number of cows
coming to slaughter the last couple of months has been in excess of
100,000 head versus levels of a year ago. The elephant in the room
that is yet to be decided is will sellers be able to hold prices
steady.
