US Perspective—12.11.13
12/11/2013
www.themaxfieldreport.com
Members of the big packer trade report that interest slowed considerably as we reached the end of the trading week last week. The consensus is that buyers needing hides took care of business in the middle of the week. In addition, the sentiment of the trade is that sellers appear as if they met much more resistance last week to higher prices and although sellers may have sold all of the hides they desired, there is no question it took much more effort.
We are calling prices higher for last week, with most selections trading dup a dollar over the previous week’s trading levels. Best ideas from tanners were as high as $107 delivered for HTS, while ideas on BBS were closer to $110 delivered and HNS a couple of dollars higher than this. It did not appear as if there were as many interested buyers for Jumbo or Super-Jumbo steer hides as compared to the past couple of weeks as well.
We have heard from several pundits who have mentioned that the increase in resistance is an indication that prices are a bit “overcooked”. They added that perhaps the best thing for this market is for it to take a momentary pause in order to allow everyone to collect their breath. This would allow everyone to adjust their games plans, as it appears hides are on a path to exceed the all-time highs set earlier this year.
As of this writing, this is a difficult time for many members of the trade. Packers have begun reducing slaughter levels, as they simply cannot sell box beef high enough to offset the costs they are paying for live cattle. Unfortunately, considering how tight supplies of live cattle will be for the next several months, this problem is only likely to worsen before it improves and there is speculation we will see slaughterhouses shuttered in the coming months.
Meanwhile, tanners also find themselves in a difficult situation as well. Many gave concessions on leather prices in August due to the decline in hide prices. Now with prices almost $20 per hide higher than the lowest point in August (using HTS), tanners now not only have to recoup the concession they granted, but obtain additional increases in order to avoid suffering huge losses.
That said, we see turbulent waters ahead and unfortunately, it is likely the situation will worsen for many before it improves. However, this does not change the fact that we are in a market where demand is outstripping supply and we see no reason why the firm tone of the market will not continue.
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