US Perspective—04.02.14
04/02/2014
www.themaxfieldreport.com
Last week saw the majority of Asia out of the office in preparation for the new year holiday that started on January 31, resulting in a quiet week of trading. The few buyers who made an effort to explore the market last week found that packers had a few more hides for sale than most had anticipated, while asking prices on hides offered last week were anywhere from $1-$2 higher across the board.
Overall, the sentiment of the trade is that last week was not a busy week of trading and the general lack of activity made it difficult for those selling hides to push prices higher. The consensus in the trade is that trading levels last week reflected no worse than steady levels, while it is likely the USDA Export Report this Thursday will reflect that it was by far our slowest week of trading for the 2014 calendar year.
Meanwhile, members of the cowhide trade report a similar tale as those in the big packer trade, as it appears the Lunar new year holiday definitely took its toll on interest. Overall, sources share that there were a few isolated tanners interested in buying last week; however, when they discovered that producers were looking for anywhere from $1-$2 higher than their last traded levels, buyers could not make excuses fast enough as to why they were not interested.
The trade appears in agreement that it is highly unlikely that producers sold a week’s worth of production last week.
As to what we expect for this week, it is likely that this week could even be more uneventful than last week, as most Asia tanners will still be on holiday, while there are rumblings that some may even stretch their returns to as late as February 17. Like last week, we look for only isolated interest at best and it is difficult to imagine that any buyers will be looking to establish higher trading levels, especially on limited volume.
In the meantime, the anticipation of a general lack of interest this week should not be any major problem for producers, as packers have cut their slaughter levels due to tight supplies of live cattle, coupled with a significant decline in box beef prices. This lack of slaughter means those selling hides should show plenty of patience and wait for those needing hides to reveal themselves.
For now, we believe we will see an uneventful market this week and this should mean no real change in prices. In fact, considering the sold-forward position of most sellers and the lack of animals being slaughtered, we could make a logical argument that tanners are likely to find the market even more firm than when they departed for their holidays, resulting in most suffering from “sticker shock” when they see the prices.
That said, we still have concerns over possible credit problems facing tanners when attempting to take delivery of recent purchases that are close to their highest purchases on record. As we move forward and the time comes to ship hides that are even more expensive, we believe that credit problems will increase in magnitude and it is likely credit could be the downfall of this market.
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