US Perpective - 20.5.14
20/05/2014
As far as trading levels are concerned, as mentioned, we are of the opinion that prices on our price guide at the end of the week are likely trailing actual trading levels. We heard numerous reports of sellers trying to conclude business on “special offers” as quietly as possible and encouraging those buying hides to keep trading levels as quiet as possible.
Trading levels we are aware of are HTS trading at $102 and rumours of $101, while sales on BS reflect levels of $101 and rumours of $100. Meanwhile, we have HNS trading at $107 and rumours of $106, while sales on BBS reflected levels of $106 with rumours of $105. In the meantime, it appears packers still have plenty of heifers for sale and trading levels reflected some significantly lower prices last week with HBH as low as $85 and HNH at $87 and rumours claiming even lower levels.
In the cowhide trade, members of the trade report many of the problems in northern China seem to be subsiding; however, we are hearing that many producers are struggling to get L/Cs open from tanners. Several sources cited numerous excuses from buyers as to why they cannot open L/Cs and this is weighing heavy on shipments. The good news for producers is that slaughter continues to be unseasonably low and year-to-date the cow slaughter is down 339,000 head or 12.56%.
As far as trading levels last week, we understand HNDC traded as low as $86, while sales on HNC checked in at $79. Meanwhile, HBC were not exempt from lower prices as we have material in the north at $69, while sales in the south were concluded at $67.
THE LOOK AHEAD
As to what we look for this week, we were hearing reports that many of the sellers were attempting to convey a message that the downward trend in prices was easing towards the end of last week. However, we have questions as to whether or not producers collectively have sold enough hides and are leaning with some members of the trade who are of the opinion that prices continue to seek a trading plateau.
Meanwhile, split prices remain under pressure, as we have reports that prices of wet blue splits dropped again last week and prices are now down as much as 15% from their record levels achieved in the middle of March. This is not good news for tanners, as they will in turn be looking for even lower hide prices in order to offset the loss of revenue from splits.
In regards to offers, we suspect the number of hides offered will not be much different from last week, while the issue for those selling hides will be whether to lower their asking prices to match trading levels from last week. However, many sellers are reluctant to lower asking prices, as they tend to believe it only encourages lower ideas from buyers.
The wild card in our opinion is the slaughter. We tend to believe that packers will get their “arms around the live cattle market” in the next couple of weeks and with live prices to drift lower, we look for slaughter levels to move into the 615-625 level in June and believe that sellers should be selling into the market.
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