US Perspective - 15.07.14
15/07/2014
www.themaxfieldreport.com
Last week saw packers with only a limited number of offers; however, this does not appear to have deterred buyers. According to sources, packers saw better-than-expected interest for all selections and this, coupled with a slaughter that was at an all-time low for July, allowed packers to extend their sold-forward positions while obtaining incremental price increases on some selections.
Popular opinion in the trade is that packers likely sold at least a week’s worth of production last week, while trading levels were reflecting prices as high as $116 delivered for HNS, $114 delivered for BBS and $112 for HTS. Elsewhere, we heard sales on BS at $111 delivered, while we even hear of sales on CBS as high as $109.50-$110 delivered.
The key as we see it was the amount of business that was not concluded last week, whether it was because the buyers’ ideas were too low, or instances where buyers were looking for more hides than the sellers was willing to part with, leaving us with the impression there still remains a decent amount of underlying demand.
Last week saw the first signs of good news in the cowhide market. We heard from a number of sources who shared that interest was moderate to decent last week, the first time we can report this in weeks. Overall last week, we saw limited offers from producers as the number of cows in the slaughter mix continues to run at unseasonably low levels.
In the meantime, buyers who started last week with aspirations that they would be able to buy at lower prices found sellers in no mood to discount prices, and by the middle of the week it was clear that only steady prices would buy cows.
As to what we expect for this week, with expectations that slaughter levels for the remainder of the month are likely to struggle to exceed 600,000 head on a weekly basis, we do not expect lengthy offer lists from any producer. Rather, we look for producers to offer lists to be limited in the number of selections that they offer, while we look for quantities offered to remain limited as well. That said, we would be shocked if those offering hides did not raise their asking prices as it appears there are more buyers in the marketplace than sellers.
Keep in mind that sellers over the course of the past couple of months have overcome a number of negative variables in the marketplace such as problems surrounding pollution, delayed shipping schedules from tanners and slow letters of credit openings and payments. This is leading to thoughts that producers may have weathered the worst of the storm and with the busy season for tanners only four or six weeks away, it is very likely if prices are to change, they will move higher before they move lower.
For now, we expect a stalemate as we are still technically in the slow season for most tanners. However, with buyers struggling to come to grips with the firm tone of the market, we tend to lean towards the opinion that buyers are facing a long uphill battle. We suspect hide prices by the fourth quarter of this year are likely to exceed the previous highs set in the first quarter of 2014.
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