US Perspective – 13.5.14
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Prices of US big packer hides succumbed to pressure last week and by the time the week was over, prices were down anywhere from $2-$4, depending on the selection. The good news is that there were a fair number of hides sold last week, leading to opinions that those interested in buying hides this week may find packers not as willing to negotiate prices.
As far as trading levels are concerned, HNS were sold at levels of $107-$108, while BBS exchanged hands at $106-$107. Other sales were calling trading on HTS in a range of $102-$103, while sales of BS were also running close to $102-$103 and sales on CBS at $100. Meanwhile, downward pressure appears to have gotten the better of trading levels on heifers, as we are aware of sales on HBH as low as $88, while HNH fared a bit better with sales at $92.
Members of cowhide trade report that sellers were not as fortunate as those in the big packer trades as business remained uneventful last week as the aftermath of the problems in Hebei continue to wreak havoc with the market. In the meantime, some members of the trade are blaming resales of European cowhides for the lacklustre activity last week as unconfirmed rumours are claiming as many as 200 containers of European cowhides were resold.
As to sales last week, the consensus is that it is highly unlikely that producers sold a week’s worth of production, even with the number of cows slaughtered last week: 22,000 less than the same week last year. In regards to trading levels, we had HNDC trading in a range of $87-$88 with unconfirmed rumours of sales at lower levels, while HNC sold at levels of $81, with rumours of some sellers taking even less. As to HBC, it appears these may have the most pressure as we have reports of sales in the north as low as $70 and in the south at $67, while there are plenty of rumours claiming even lower levels were accepted.
THE LOOK AHEAD
As to what we expect for this week, it is likely buyers sensing the softer tone of the market will be interested in testing the resolve of sellers. The good news for packers is last week saw lower slaughter numbers at the end of the week and early indications are that packers are likely to temper their enthusiasm to slaughter animals until they can get their margins back to levels that are more “comfortable”.
Keep in mind, packers had a decent week of wet-blue sales the week prior, and this, coupled with what many pundits believe was a decent week of wet-salted sales last week, is likely to result in packers a little less willing to negotiate prices, especially with slaughter slipping back below the 600,000 head level.
The challenge for the trade moving forward is determining the outstanding leather order for tanners. Historically, April to June is the slow season for tanners, and it remains to be seen if leather orders for this period are equal to levels of a year ago.
Another outside variable working against the market is reports that a number of sellers in the wet blue split trade are encountering difficulties securing timely L/C openings, while we have even heard of a few instances where older, expensive contracts have been cancelled. It is no secret that the value of wet blue splits is off anywhere from 10-15% depending on the type of split and this is having a huge impact as to what tanners are willing to pay for raw hides.
Meanwhile, members of the cowhide trade are likely in for another difficult week as they continue to try to sort out the aftermath of the problems in northern China. This is likely to lead to buyers who are willing to take prompt delivery of product to remain aggressive, while we look for ideas in general to remain lower than asking prices and sellers wrestling to decide if they should accept lower levels.
