US Perspective—29.04.14
29/04/2014
www.themaxfieldreport.com
Packers grudgingly gave way to downward pressure on hides last week, with most prices down $1-$2, depending on the selection. When speaking with various members of the trade, there were a number of reasons listed for the decline, with some claiming it was the end of the busy season for most tanners and other pointing to ongoing pollution control by the Chinese government. There are also declining split prices, a tax investigation in southern China, exhausted credit lines of tanners, and fluctuations in the exchange rates.
In our opinion, of the reason listed above, we tend to believe the pollution initiative and the decline in split prices are the two main driving factors. As we have been reporting, a number of tanners in the northern part of China have been unable to operate, as they do not have adequate effluent treatment facilities.
This has bottlenecked shipments of cowhides as well as splits, which has resulted in prices dropping for both. In the case of drop splits, some sources are calling prices off as much as 10% from the record highs achieved last month. This translates to roughly $3-$4 less, and this has tanners looking to pay less for hides in order to maintain their bottom lines.
Meanwhile, re-sales on cowhides continue. Various reports claim there are as many as 200 containers that have had to be repositioned or resold. Unconfirmed rumours claim that some sellers have had to discount original sales prices by as much as $10 per hide in order to liquidate problematic containers, as tanners able to take delivery of this product are well aware of the problem.
As far as trading activity last week, with packers “officially” only offering a negligible number of steer hides and plenty of lighter-weight steer and heifers, there was not much on the menu for buyers. However, we are told several of the packers were trying to work behind the scenes quietly with some of their preferred customer to conclude new business. Meanwhile, we understand traders were much more active last week and several were pursuing tanners for voluminous bids for May shipment.
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