US Perspective—05.11.13
05/11/2013
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Prices of big packer hides moved higher last week, with popular opinion in the trade that interest from traders was the primary driving factor in the market. Last week saw packers’ offer lists somewhat limited, as the vast majority of offer lists were void of any offerings of regular-weight steers hides, while there was a modest increase in the number of Jumbo and Super-Jumbo steers offered.
According to sources, a few members of the trade saw unsolicited ideas by a handful of tanners as high as $108 delivered. Meanwhile, trading on BBS started the week at levels of $108 and with sales easy to come by at this level and plenty of buyers looking to buy, sellers capitalised this easily into sales as high as $110 delivered. Sources share that sales on Jumbo HTS sold at levels of $120 to as high as $122 delivered depending on weight and origins, while we continue to hear that many of the packers are continuing to struggle to move heifers as it appears buyers are more interested in steer hides due to the lucrative split market.
Overall, popular opinion of the trade is that packers are entering this week well sold on most selections, with the exception of heifers, while a couple of the packers appeared as if they were still pressing to move some Super-Jumbo HTS, looking for sales that could ship within the next two or three weeks. Also worth noting is that packers in general continue to struggle to liquidate their outstanding sales contracts for regular-weight steer hides and we have heard from sources who are now more than one month tardy with some of their shipments. Sources also report that when packers are finally able to ship their outstanding shipments of regular weights, it is likely that the hides will weigh anywhere from six-to-eight pounds heavier than contracted. Reports from the cowhide trade claim that producers did not offer nearly as many hides as in the previous few weeks, and the few hides that were offered had some rather lofty price ideas attached to them, with most prices up $2-$3 versus levels of the week prior.
We look for offer lists this week to have only a few isolated selections for sale and we doubt there will be any offers of regular-weight steer hides. Rather, we believe most lists will have heifers, Jumbo and Super-Jumbo steer hides for sale, while we look for processors to have lists that are limited as well, especially considering that the substantial reduction in slaughter numbers is leaning heavily towards cows.
As prices are rapidly approaching the all-time record levels we saw following the APLF exhibition in Hong Kong this spring, it is very likely we will start to see some problem moving forward with tanners’ cash-flows being stretched to the limit and complaints of being unprofitable. However, if anyone can sympathise about unprofitable margins it would certainly be packers who have been losing money for the lion’s share of the third quarter and have carried the red ink into the fourth quarter. This is why we suspect it is unlikely anyone needing hides is going to catch a break on prices.
At the end of the day, demand is simply greater than supply, with it appearing that leather demand is better than many of us suspected for the fourth quarter. Meanwhile, with forecasts that we are likely to see even further reduction in slaughter levels as we move closer to the end of November, we tend to agree with those members of the trade who say prices are to likely exceed the record levels seen earlier this year.
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