US Perspective – 7.10.14
07/10/2014
www.themaxfieldreport.com
The consensus of the trade is that last week was not a particularly busy week of trading for packers as a combination of the Golden Week Holiday in China and annual USHSLA meetings in Chicago towards the end of last week resulted in only a handful of sales.
According to sources, buyers who expressed interest appear as if they had their sights set on buying at lower prices, as they believed that a number of the packers had at least a few selections they were looking to sell. However, it appears that packers had other ideas and with most looking to try to hold prices steady, the sentiment of the trade is that there was not many hides exchanging hands and it is doubtful that packers cleared their slaughter.
In the meantime, we continue to hear reports claiming some of the traders appeared much more aggressive than packers the past couple of weeks. This is leading to speculation that traders were likely attempting to liquidate their long positions, while there are even some unconfirmed rumours that some traders were accepting interest at levels well below the asking prices of packers, leading to thoughts some might be selling the market short.
Overall, it appears that HNS and BBS hides remain in decent demand and trading levels on these selections appear as if they are unchanged, while there were plenty of rumblings about sales of HTS, BS and CBS taking place last week at levels supposedly under their last reported trading levels, which we were not able to confirm.
As far as trading, we have a couple of sales today from business concluded over the weekend, as we have sales of regular weight HTS reflecting levels of $109, while sales on BBS check in at $114.50.
Members of the cowhide trade have a similar take as those in the big packer trade. Overall, interest as expected was very sluggish last week and the few buyers with interest had price ideas that were several dollars under the official asking prices of producers. As has been the case the past few weeks, interest on HNDC allowed a few isolated pieces of business to be concluded, however, it appears the majority of the trading was below the ninety-dollar FOB level.
In the meantime, sources report that interest on HNC and HBC remains difficult to come by, especially for producers looking to trade volumes at levels close to the last reported levels. Overall, popular opinion of the trade is that there are more than a few producers with unsold inventories of these selections and this is leading to thoughts that buyers with cash and the ability to take prompt shipment may have a buying opportunity in the near-term.
The only trading reported from over the weekend was a sale on processor HTS with levels reflecting $106.
THE LOOK AHEAD
As to what we expect this week, we tend to suspect there is a very good chance we will see a few more hides offered this week. Meanwhile, we would not be terribly surprised if we saw some slight downward adjustment on asking prices on some selections, especially those selections that have been sold last week by sellers quietly at levels below the last reported trading levels.
We believe the upward momentum in prices has definitely stalled. However, we also believe buyers who are looking for a sizeable correction in hide prices are likely to be disappointed. We say this as although there are plenty of questions as to whether leather demand is equal to levels of a year ago, it is likely later this month we see a sizeable reduction in the nation’s weekly slaughter numbers as supplies of live cattle are expected to tighten further. Worth noting, some pundits predict the decrease in the slaughter could be 6-8% lower than recent levels and if correct, would without question assist sellers in avoiding any substantial decline in prices.
Another variable worth keeping an eye on in our opinion: there are a number of tanners preferring to buy hides during this time of year, believing these hides are the “best of the season” – although this might not be as prevalent as it was a number of years ago. The pending reduction in slaughter levels and forecasts of below normal temperatures and above average levels of precipitation for winter could encourage some tanners to consider hedging their raw stock needs.
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