US Perspective - 23.09.14
23/09/2014
www.themaxfieldreport.com
Last week was a sluggish week of trading for most in the big packer trade. We did encounter a couple of isolated reports of some members enjoying better interest than they anticipated; however, there were plenty of members of the trade wondering if packers were able to liquidate their slaughter last week.
What we found particularly interesting was that the week started with only a few limited offers from packers, especially on wet-salted hides. However, by the middle of the week, we understand a couple of the packers were attempting to offer selections of wet-salted hides very quietly to a few of their “preferred” customers, while we also heard that one of the packers was indicating that they were not opposed to fielding unsolicited bids from prospective customers.
As far as trading is concerned, we heard that the best ideas on HNS reached as high as $124 delivered, while there were a few isolated sales on BBS at $123, while the majority sold at $121-$122 delivered. Meanwhile, best ideas on HTS were running close to $118 with rumblings of 50 cents higher, while we heard ideas on BS were running around $117-$118. In the meantime, there were unconfirmed rumours of BS selling as low as $115 and CBS at $114; however, in our opinion these appear more “ideal” buying targets for buyers, than levels at which trading took place.
Members of the cowhide trade also experienced a lacklustre week of interest last week. Overall, offer lists appeared in line with levels of the week prior; however, with equivalent material offered from other parts of the world at levels several dollars under the asking prices of US producers, popular opinion is that sellers struggled to liquidate a week’s worth of production, even at reduced levels.
As for prices, we were hearing all week that buyers were bidding a couple of dollars under official asking prices, and by the middle of the week, it appeared some sellers were attempting to counter the lower ideas of buyers. According to sources, most selections traded at lower levels last week, with the smallest decreases attributed to HNDC, which easily saw more interest than other selections.
With regard to prices, HNDC were trading in a range of $88-$90 FOB, while HNC sold somewhere slightly north of the mid-$70s ($77 FOB) and sales of HBC struggled to stay in the upper-$60 range, with sales at $67 for northern material.
As to what we look for this week, in our opinion this could be a make-or-break week both for buyers and sellers. On the one hand, we have sellers who have been advertising for some time that they possess these strong sold forward positions; however, there were signs starting to develop last week that would indicate that these positions are weakening. In the meantime, sales over the course of the third quarter of the calendar year have been much lower than levels in the first two quarters.
At the start of autumn, many long-term weather forecasts in the US have predicted a winter that will be unseasonably cold and likely to have more precipitation, so we may see buyers a bit more active the next four-six weeks trying to buy hides before conditions deteriorate too badly.
One thing worth noting that we have not addressed in some time is that the recent initiative by the Chinese government to bring all tanneries into compliance is going to add costs to those tanners who previously had not been meeting these standards, but are intending to continue to operate. Some pundits would place the costs to upgrade these facilities easily from $4 to $6 per hide. That said, this cost is going to need to be passed along in in the form of higher leather prices or the need to lower hide prices because we doubt the tanners will want to take this cost out of their bottom line.
At the end of the day, we are of the opinion the stalemate between buyers and sellers may continue this week. However, we also believe there is a very good chance we will see some movement within the next couple of weeks, we are just not certain which side (buyers or sellers) can hold out for longer.
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