US Perspective—27.08.13
27/08/2013
www.themaxfieldreport.com
Opinions are mixed in the big packer trade as to exactly how many hides exchanged hands last week, as we have encountered some members of the trade sharing information on some sizeable volumes traded, especially towards the end of last week. In the meantime, the sentiment of the trade is that it is very likely that a good number of these sales will not be reflected in this week’s Export Sales Report.
There continue to be numerous rumours insisting that a number of producers have unsold inventories exceeding much more than they are willing to admit, and it appears perceptive buyers with the ability to take prompt delivery of product were the winners last week. Packers begrudgingly accepted less money for their hides last week. We heard from a number of different sources that prices for HTS and BS were no better than $88 FOB, while BBS and HNS appear to have held their value a bit better with sources sharing they were aware of trading at $93 FOB for BBS and $95 for HNS.
Worth noting is the encouraging news for those producing hides are reports that the number of inquiries improved dramatically last week. This is providing at least a “ray of hope” for producers that perhaps prices are finally coming into a range where buyers cannot afford not to at least consider replenishing part of their raw stocks.
In regards to trading, we have a handful of sales concluded over the weekend led by reports on regular weight packer BS at levels of $85, while sales of Jumbo BS reflect levels of $95. We also have a couple of sales on CBS at $86, while the only other trading was a sale on packer regular weight HTS at $88, while sales of Super-Jumbos reflect levels of $100.
According to sources, buyers started the week taking dead-aim at moving prices lower to the chagrin of sellers; however, towards the end of the week sellers recognised that in order to sell hides they would have to be willing to accept lower prices. What we find interesting about the cowhide trade is that the first half of this year surprised the trade as the cow slaughter maintained year-over-year gains from the start of the year until mid-July. Sources attributed the strong cow slaughter to a distressed dairy sector that was forced to liquidate inventory, and to continued drought in parts of the country that forced more beef cows to market.
As margins are improving in the dairy sector, coupled with feed cost dropping, expectations are that we are likely to see fewer dairy animals in the slaughter mix the remainder of the year. In addition, recent rains in much of the south-west have set pastures on a restoration track. In most cases, this is likely to stop the liquidation of beef cows, and in some cases, ranchers will turn their focus to rebuilding their herds.
Prices of big packer HTS are now almost 14% lower than levels following the APLF exhibition in April. One would logically assume tanners would like to see some stability in the marketplace, as it is no secret that leather buyers are lobbying tanners for price decreases on new leather orders. Hide sellers are looking for some stability themselves as it is no secret there are a number of hides still outstanding that are several dollars higher than the current market, and we believe that no one wants to see a repeat of what took place in 2009.
At the end of the day, we believe that we are going to get a very clear idea of the positions of sellers based on their offers this week when visiting tanners. We also expect to get a much clearer picture of how busy tanners are by those travelling to China for the All China Leather Exhibition in Shanghai (September 4-6). We can only hope that the exhibition will provide us all with a clearer picture of what we can expect for leather demand in the last third of the year.
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