US Perspective—06.08.13
06/08/2013
www.themaxfieldreport.com
Last week buyers continued to press for lower prices, while packers for the most part refused to follow. The sentiment of the trade is that as prices of HTS have approached the $100 delivered level, packers decided that they were “drawing the line in the sand” and refused to consider anything lower than their last established trading levels $94 FOB for HTS and BS, HNS $97-$98 for BBS and $99-$100 for HNS.
Reports from overseas claim that the driving force of the market remains China, as it appears Chinese tanners continue to be the ones supporting this market.
Towards the end of last week there were rumours that some of the larger traders in the US had accepted business on HTS at levels as low as $99 delivered; however, we could not confirm such prices, and we continued to hear that most sellers remained anchored on levels of $100 delivered. Overall, popular opinion is that last week was not a busy week of trading, while prices for the most part were unchanged with levels of the week prior, mainly due to a general lack of trading reported.
As mentioned last week we have spoken to a number of individuals who have shared that they have encountered problems (claims) from tanners in the past two or three weeks, which of course are on hides that are priced well above current trading levels. Meanwhile, we also continue to hear problems securing timely openings of letters of credit, especially in the southern part of China. In addition, there are unconfirmed rumours of suppliers who are desperate to get letters of credit open and are supposedly proposing cheaper prices.
Also worth sharing is that collectively as a group, tanners appear as if they continue to find BBS and HNS better options than HTS, allowing these selections to command premiums that total several dollars over trading levels on HTS. Meanwhile, another interesting development is the price spread between HNS and HNH as trading levels on our most recent price guide (Friday) has this spread at $18 per hide. We would tend to think heifers would be attractive at such a discount as we move ahead this week.
In the meantime, it appeared as if for the first time in several weeks, the cowhide trade faced some downward pressure last week. According to sources, buyers looking to buy at levels below the last traded levels found buyers not as standoffish to their ideas; however, with most producers unwilling to consider any significant reduction in prices, popular opinion in the trade is that not many hides exchanged hands last week.
As to what we expect this week, we would be shocked if we saw any real adjustment in asking prices. That said, considering that asking prices on big packer hides last week were roughly $2 higher than where they actually traded at the end of the week prior, we would not be shocked if we saw packers lower prices by a dollar.
Meanwhile, as we are in the “Dog Days of August”, which historically is not a busy time for most tanners. We need to remember the All China Leather Exhibition in Shanghai is only four weeks away and keeping this in mind, we will see many members of the trade soon departing for Asia to travel prior to the fair within the next ten days to two weeks.
In the meantime, there continues to be plenty of speculation as to exactly how many hides producers have for sales. We would tend to side with those members of the trade who are of the opinion that producers have failed to liquidate the slaughter on a consistent basis since the end of March.
Many continue to insist that there are hides for sale much sooner than what is being advertised on sellers’ offer lists and it will certainly be interesting to see how all of this plays out over the course of this week.
Meanwhile, as we are now in the first full week of August the window of opportunity for tanners to buy what is commonly believed to be the best hides of the year is slowly closing. There are forecasts by various pundits that we will see a significant reduction in slaughter levels the fourth quarter of this year, so one could make an argument that the next six-eight weeks are a prime opportunity for buyers to replenish their inventories. Leading us to believe the two or three weeks leading up to the ALCE could be very interesting.
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