US Perspective—28.05.13
28/05/2013
www.themaxfieldreport.com
Reports from members of the big packer trade claim packers drew the line in the proverbial sand at the end of last week and this is leading to opinions that it is very likely we have seen prices bottom for the moment.
According to sources, attempts last week to buy HTS at levels under $105 delivered, BBS at $106 delivered and BS at $104 delivered were met with quite a bit of resistance and if all of the stories we are hearing about sales are correct, there is a decent chance that packers sold a week’s worth of production.
In the meantime, we continue to hear that there are producers with more than ample supplies of unsold wet blue for sale. Buyers recognising this have been reported as bidding aggressively lower in order to test the wills of sellers; however, as of this writing, we are not aware of any producers chasing significantly lower ideas on wet blue hides.
Although prices of big packer hides drifted lower again, there is starting to be a bit more talk about trading levels that are close to finding a trading range. Towards the end of the week, it appears packers “dug in their heels” and buyers looking to push prices even lower found packers not willing to co-operate.
At the end of the day, it appears there was a fair amount of support this week at levels around the $104- $105 delivered mark for HTS. Meanwhile, if various reports from sources are correct, packers in general had a successful week of trading as there are rumours swirling that many of the packers easily sold 100-plus containers of product this week.
As we look ahead to this coming week, the first thing that comes to mind is the fact it is a holiday week, as the US celebrated Memorial Day on Monday. This will reduce the slaughter substantially and early expectations is that next week’s slaughter will labour to exceed 600,000 head. With packers enjoying a decent week of sales this week, it is likely that we will see offer lists not as populated next week, while we anticipate asking prices will be no worse than steady.
The wild card looking forward is beef demand. As of this writing, beef demand has been better than pundits had anticipated, allowing packers to achieve record levels for boxed beef and pushing their margins to their highest levels in the last few years. The question as we move into June is if packers can keep this momentum moving forward. Early expectations are that beef demand is likely to soften and in turn this is likely to reduce slaughter levels next month.
In the meantime, members of the trade continue to try to sort out leather business for the third and fourth quarters of 2013. We have heard from numerous sources that there has been a huge change in women’s fashion for the second half of 2013 focusing on footwear. The change is in women’s boots; knee-high boots that have been popular appear to be out for next season and ankle-high boots will be all the rage. We are also hearing that handbags this fall are leaning towards smaller bags as opposed to the larger bags that have been so popular the last couple of seasons.
If these stories are even close to being correct, this would be a sizeable bite out of leather demand. The good news is that automotive sales in the US and China are running above expectations and so good in fact that US producers are reducing the number of days they will be closed for summer shutdowns this summer. The only problem is that with many of the modes being produced by US car companies, there are not a lot of US hides in the product mix.
All of that said, we tend to lean towards the opinion that we are precariously close to finding a trading range for the time being; however, we tend to suspect as we continue to move through the remainder of the calendar year that we are slowly going to grind our way a bit lower.
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