US Perspective—10.12.13
10/12/2013
www.themaxfieldreport.com
Sellers were a bit more willing to negotiate prices in the second half of last week and popular opinion is that there was a fair number of hides exchanging hands. It will be interesting to see how many of these sales will make it on this week’s USDA Export Sales Report as we understand there were a fair number of hides sold on the 28th and 29th of November that did not make it onto last week’s report and will be added to this week’s report.
Trading levels last week saw HTS sold in minimal volumes at $107-$107.50 delivered to start the week; however, when it was revealed that $106 delivered could buy hides, many more sales were concluded. Meanwhile, we are aware of packers selling BS in reasonable volumes at $105 delivered, while trading on BBS were indicating buyers were willing to pay a premium with sales in the range of $109-$110 delivered concluded, while sales of HNS were approximately a dollar to two dollar more than BBS.
As to how many hides exchanged hands, it appears many pundits are leaning towards the opinion that it is likely we will see combined sales exceed last week’s slaughter. That said, it will certainly be interesting to see if we have some additional follow-though business this week.
Reports from the cowhide trade claim that sellers started the week with intentions on trying to hold prices steady with the week prior. Unfortunately, this was met with a fair amount of resistance from buyers and by the middle of the week, many producers decided that they would have to be willing to negotiate prices if they were going to trade hides last week.
Overall, the consensus of the trade is that prices were off roughly a dollar across the board from the week prior. However, worth noting prices were coming off their all-time record highs and cowhide prices as a weight average are still trading at levels 21% higher than a year ago.
Some sources in Asia continue to insist that leather orders are falling short of expectations for the first quarter of 2014. This, coupled with current trading levels and inability to raise leather prices, is encouraging many tanners to consider taking longer than usual time off for their Chinese New Year Holiday.
As to what we expect this week, looking at the calendar, there are only two full weeks of trading remaining this calendar year. We would assume sellers are likely to adjust their asking prices to reflect their last traded levels, looking to try to hold prices steady. Meanwhile, buyers are aware that prices have drifted a bit lower and we look for them to continue to try to press for further decreases, as we know tanners continue to struggle to obtain any appreciable increases in leather prices on new orders.
Although last week’s slaughter was down almost 2% from levels of a year ago, it was surprisingly higher than many pundits had been expecting. It’s worth noting that at the end of November many pundits were forecasting slaughter levels in the low 600,000-610,000 head level and these “extra” 20,000 hides were probably not calculated in the sold-forward positions of producers at the start of last week.
That said, we remain of the opinion that there are still some producers who have a selection or couple of selections of hides that are not sold out as much as their other selections. We look for these sellers to be a little more aggressive in marketing these hides and buyers of these selections who have money and are able to take delivery may have an opportunity to negotiate prices.
In the meantime, those looking for a substantial correction to prices overall are likely to be disappointed.
We remain of the opinion that there will simply not be enough animals slaughtered the first quarter of 2014 to result in any significant pressure to sell hides and those buyers requiring coverage should consider covering their needs at least a couple of weeks before the Chinese New Year holiday at the end of January, or they may be disappointed.
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