US Perspective - 24.06.14
24/06/2014
www.themaxfieldreport.com
Last week was not an active week of trading for packers as Chinese tanners in particular were inactive again. Some pundits blame the lack of offerings by packers for the lack of interest, while others point to the fact that Chinese domestic demand has slowed considerably. Others point to the July 1 deadline when all tanners must comply with new pollution guidelines and with all of the uncertainty, this is preoccupying the majority of tanners’ time.
Regardless of the reason for the general lack of interest, popular opinion is that it is highly unlikely that packers cleared their slaughter last week. It will certainly be interesting to see if packers offer lists are a bit more populated this week, especially considering that slaughter levels are primed the next several weeks to be their highest of the year.
Packers were refusing to succumb to lower trading levels and insist that they were able to trade hides equal to their last established trading levels. As it pertains to sales on BBS, we heard of sales at $113-$114 delivered, while sales on HNS were reflecting levels approximately a dollar higher. Meanwhile, sales on HTS were running close to $109-$110 delivered, with sales on BS a dollar back. In the meantime, we did hear of some trading on heifers leading to opinions that perhaps sellers had found the bottom-end of the trading range with sales on HBH at $90-$91 delivered and sales on HNH a couple of dollars higher.
As it pertains to cowhides, sources were reporting an overall disappointing week of interest, as it appears the fallout from the pollution problems in northern China. This coupled with reports that Europe and Australian both have their fair share of unsold cows for sale continues to wreak havoc with producers in the US, even though the number of cows coming to slaughter is at historic lows.
Numerous sources shared last week that the only selection that seems to be drawing any substantial interest in HNDC and, with offers limited, it appears that producers were able to hold prices steady on this selection at $94-$95 delivered. Meanwhile, producers struggled to find decent price ideas from buyers on HBC and HNC. According to sources, ideas on HNC higher than the low $80s was a difficult task, while we are hearing ideas higher than the low $70s for HBC are few and far between.
It is likely we will see a few more offers this week as we are not buying into the hype from packers who insist that they are well sold. Producers continue to struggle with shipments, as illustrated by the most recent USDA Export Report. This, combined with slaughter numbers that are likely to reach their highest levels of the year over the course of the next several weeks, is likely to flush out some of the overstated sold forward positions many producers have been boasting about.
A couple of upcoming events are not likely to bode well for those selling hides: summer vacations in Europe, and more importantly, the July 1 pollution deadline in China. Although we know there are several members of the trade of the opinion we will not see the extent of problems that we saw in north China, we tend to take a different view. In our opinion, if there were as many tanners within a few hours of China’s capital who were not complaint, it would not be that wild of an assumption to suspect we will find more tanners out of compliance the further we move away from Beijing.
In the meantime, we also remain of the opinion that spending in China is slowing and although pundits in the US will tell you our economy appears to be moving along, has anyone been in the grocery store lately buying any type of protein? Food costs in the US are substantially higher than a year ago and although unemployment levels are lower than a year ago, many of the jobs created are not high-paying jobs and we are of the opinion disposable incomes for many families are not quite as large as a year ago.
That said, at the end of the day, we continue to struggle with thoughts by producers that there is enough demand to hold prices steady and have even heard from some that they believe prices will move higher. For now, we remain of the opinion that there are certainly some subtle softer tones in the market.
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