Courtesy of The Maxfield Report

www.themaxfieldreport.com
The consensus of both the big packer and cowhide trade is that last week was a relatively quiet week of trading, especially if compared with levels two to three weeks ago. The sentiment is that although those fortunate enough to sell hides were able to eke out steady to incrementally higher trading levels on big packers hides, sellers admitted to having to work much harder to conclude business.

Meanwhile, in the cowhide market, the ongoing problems in northern China and more specifically Hebei were forcing sellers to trade at steady to slightly lower trading levels. Overall, the consensus is that it is unlikely producers failed to liquidate their slaughter last week and if correct, would be the third consecutive week this has occurred.

As to trading levels last week, sales on HNS continued around the $113 level and BBS at $112, although there are some packers insisting that they can obtain more than these levels. Meanwhile, trading on HTS and BS appear as if there is no differential, as we had sales on both selections at $107. In the meantime, offers of Jumbo and Super-Jumbo hides were not as plentiful last week, which is not surprising considering we are not out of winter and moving through spring.

With regards to trading over the weekend, one of our members shared he was able to conclude some business and is reporting that they sold CBS in decent quantities at levels as high as $107.

Pertaining to cowhides, problems in northern China with tanners unable to comply with some of the new pollution mandate has soaking levels in the Wuji / Hebei area down as much as 60%. This is resulting in a number of requests for delays in shipment and some producers having to re-sell some product. As of this writing, we have confirmation that some members of the trade in Europe have had to take as much as $3 less when reselling product, while we are aware of a dollar less  on some US material, while there are rumours of some sellers discounting product even more.

As far as trading levels last week, we had some sources laying claims of selling HNDC as high as $91, while others shared, they could only muster $89. Meanwhile, trading levels on HNC appeared as if they faltered a bit with sales down a dollar at $85, while prices of HBC did not change with their last reported level due to an overall lack of interest.

THE LOOK AHEAD
As to what we look for in the hide market this week, we tend to believe that momentum is slowing for those selling hides and the prospects of pushing prices higher appear a reality to the few remaining stubborn members of the trade who typically have a bullish mentality. That said, there are certainly some challenges facing various producers moving forward in terms of securing timely L/C openings, while some of the credit problems we had been forecasting for quite some time appear as if they are starting to come to fruition as tanners are exhausting their working capital.

The good news for those selling hides is that slaughter levels remain at unseasonably low levels and although we are at a time of the year known for an increase in slaughter numbers, we will likely see fewer numbers slaughtered this week due to poor profitability in the packinghouse. However, in our opinion those selling hides should not place too much emphasis on lower numbers, as beef demand typically improves following the Easter holiday (this Sunday), which is very late this year. This, coupled with much of the US still suffering from some lingering effects of winter this weekend, could make an argument that once weather moves towards more seasonable levels, there is plenty of “pent-up” beef demand and slaughter levels are likely to improve quicker than many expect.

Therefore we are of the opinion that sellers might be best served to try to sell into this market and it is likely that we will not see a repeat of last week where packers opted not to offer trades to the public, rather preferring to offer only direct to tanners.

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