US Perspective—09.07.13
09/07/2013
www.themaxfieldreport.com
Popular opinion of the trade was that last week saw a stalemate develop. Packers started the week with offer lists that appeared to have more than ample numbers of hides for sale. Meanwhile, asking prices were unchanged with the week prior as popular opinion was that packers were concerned that lowering their ideas closer to recent trading levels would only encourage buyers to lower their ideas further.
Overall, pundits are calling last week a lost week of trading attributed to the holiday in the middle of the week for July 4, coupled with packers’ reluctance to trade the market lower as buyers’ perceptions are that producers do not possess the sold-forward they are advertising. Collectively, this led to opinions that it is highly unlikely packers sold even a shortened week of production.
As far as trading levels were concerned, limited numbers of HNS sold in a range of $100-$101 FOB, while sales of BBS ranged from $99-$100 depending on the seller and weight. Meanwhile, sales of HTS ranged from $97 to as high as $98.50 in limited quantities, while trading on BS ranged from levels as low as $96 to as high as $97.50 depending on origin and weight averages.
Reports from members of the cowhide trade are not much different from those in the big packer trade. Sellers started the week with asking prices unchanged from the week prior as most pundits were of the opinion sellers are reluctant to adjust asking prices as it would only encourage buyers who speculate sellers need to sell hides to lower their ideas even further.
Overall, it appeared buyers and sellers were unable to come to an agreement on prices last week leaving most members of the trade thinking that it is also unlikely that producers sold even a shortened week of slaughter.
As far as prices are concerned, HNDC continue to hover around the $80 FOB mark, while sales of HNC continue to check in around the $73 FOB level. Meanwhile, interest on HBC was not active last week; however, we cannot report any change in prices as we have sales of material in the north at $62 and in the south at $60, both FOB basis. Bull prices were a touch softer towards the end of the week, with NB reflecting levels of $80 FOB and BB at $74.00 FOB.
Looking ahead to what we expect for this week, we will see slaughter levels return to seasonable levels following the July 4 holiday last week. What will be interesting to see is how producers handle the extra volume this week, especially considering that collectively, sellers have not shipped in excess of the slaughter now for a third consecutive month.
In the meantime, there continue to be reports coming out of China regarding various tanners’ inability to open letters of credit on time. There is speculation by some members of the trade that this is directly tied to the cash crunch going on in China and there are some members of the trade of the opinion that this is a bit more than a mere “bump” in the road.
Should this become a bit problematic for producers, especially if suspicions that they do not possess sold forward positions as they are advertising, it would not be surprising if we start hearing of some “special” offerings by some producers in the immediate near term.
Meanwhile, we want to be clear and point out that interest in general has not disappeared; however, we would tend to say that it does not appear as if there are as many buyers interested in buying the past couple of weeks, especially at the “official” asking prices of sellers. At the end of the day, it certainly appears from our vantage point that considering we remain in the slow season for most tanners and the fact that slaughter levels are likely to remain north of 640,000 for the next several weeks, we have our doubts if any of the sellers will be able to push the market higher.
In the meantime, although we are not bullish, we remain of the opinion prices are in need of a minor correction. However, as of this writing, it appears sellers have other ideas and it will certainly be interesting to see how producers navigate the next couple of weeks.
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