US Perspective - 22.10.14
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Prices for both big packer hides as well as cowhides came under pressure last week. According to sources, prices of big packer hides were fifty cents to a dollar less last week, depending on the selections and origin, while cowhides suffered a little worse, with prices off $1-42, depending on the selection and origin.
Overall, numerous members of the trade speculate there were a fair number of hides exchanging hands last week. Especially with thoughts that although packers begrudgingly accepted less money, it is believed they were at least able to attach some decent volumes to the lower prices they accepted.
As to some of the trading levels we heard, we are able to attest to HNS trading at levels of $113-$114 FOB, while BBS were sold at levels of $112 FOB. In regards to HTS, prices were all over the board, depending on the packer and the weight average, with prices ranging from $108-$110 FOB, while sales of BS were also in a wide range with trading from $106-$108 FOB. Meanwhile, it appeared packers who produce CBS were pressing a bit last week with sales reflecting levels of $103-$104 FOB, while trading on heifer selections reflected levels of a dollar lower with HNH at $97 and HBH at $94.
Interestingly, we have a couple of sales reported from business pending over the weekend as we have HTS reflecting levels of $109, while sales of BS check in at $107.
PACKER TRADES
In regards to cowhide sales, opinions are mixed as to exactly how many hides exchanged hands, as ideas from buyers were rather aggressive compared to ideas from buyers for big packer hides. In the meantime, numerous reports are insisting that a number of producers are pressing tanners for bids on HNC / HBC, while interest on HNDC, faltering the past several weeks, was forcing sellers to consider lower prices.
In regards to trading levels, the majority of sources we spoke with believed HNDC were trading freely at levels of $86-$87 FOB, although we are aware of producers who were making their best effort to obtain more, but meeting plenty of resistance. Meanwhile, with several producers sitting on unsold supplies of HNC / HBC, buyers are taking dead-aim at lower prices and according to sources, ideas from buyers are easily multiple dollars under what sellers had hoped would be the lowest prices they would have to accept. According to sources, there are surface trading reported on HNC at $74-$75 FOB with thoughts it will take less to move volumes, while the same can be said for HBC that sold at $65 FOB.
We had a couple of sales reported from business pending from the weekend as we have processors sharing they sold HTS at $106, while sales of BS reflect levels of $105.
THE LOOK AHEAD
As to what we expect this week, the momentum of the market has definitely shifted to the favour of buyers as it pertains to cowhides, while it appears packers are making their best effort not to relinquish momentum for big packer hides. As packers are attempting to leverage an argument that with live cattle prices on the rise, margins mirrored deep into the red and forecasts of even further reductions in the slaughter forthcoming, they have no choice but to push for higher hide prices. However, with it appearing as if demand for hides is running below levels of a year ago, this is leading to questions if the reduction in the slaughter is enough to offset the decrease in demand for leather.
At the end of the day, there is no question that record highs for live cattle have created a lot of apprehension and nervousness in the market place. To make matters worse, the uncertainty surrounding the possible spread of Ebola has the country waiting to assess further developments. Meanwhile, the political stability of the world seems threatened by ISIS, coupled with the problems in the Ukraine.
Finally, economic uncertainty in the EU is also threatening to spread, while there are plenty of questions surrounding the economic situation in China, resulting in global implications that are anything but clear.
Given this backdrop, we see a market that appears fragile and subject to volatility. This leaves us to question the upside on prices that packers are attempting to convey, while remaining of the opinion that prices likely will remain under pressure until a clearer picture of the market develops.
