US Perspective—21.04.15
21/04/2015
www.themaxfieldreport.com
The consensus of the big packer trade is there were a substantial number of hides changing hands last week once packers resigned themselves to lower prices. Overall, numerous sources reported that packers were very proactive, offering their customers an opportunity to average down some of their highest-priced sales. Popular opinion of the trade is sales last week might be the largest we have seen this year, supported by reports that the majority of packers withdrew their offer lists towards the end of last week.
As far as trading levels are concerned, it appears there were a number of HTS and BS sold at levels of $85 FOB, while BBS were sold at $96 and HNS at $98 and CBS at $85. Meanwhile, although the number of heavier-weight hides is dwindling quickly, packers were not able to avoid accepting less money on these as well with sales at $95 for Jumbos and $97 for Super Jumbos on both HTS and BS.
Another issue facing the cowhide market is that, according to reports from northern China, the pollution police are very active there again and according to sources, many tanners have been ordered to reduce their soaking levels as numbers are exceeding government standards, while we have confirmed reports of some tanners who have been closed by authorities due to pollution issues.
As to what we expect for this week, we would not be terribly surprised if producers refrained from offering this week. We look for sellers to point to the large round of sales last week and harvest levels that are running 5%-8% lower than levels of a year ago. A couple of things worth monitoring as we move forward, we agree with the opinions of other pundits that supplies of live cattle are going to increase in the near-term and we suggest readers keep an eye on harvest levels, as we suspect they might start to “sneak-up” on producers. Meanwhile, the other situation we are concerned about is the split market. Especially if all of the various rumours of unsold inventories are anywhere close to being true. At the end of the day, we certainly recognise the potential argument we are likely to hear from sellers this week about strong sales and unseasonably low harvest levels. However, we also tend to believe that leather business is lower than a year ago and we may be inclined to argue that the decrease in leather orders may be more than the decrease in supply.
That said, one could logically argue that buyers filled many of their immediate needs in the last week to ten days. If we should see any follow-through interest in the next week to ten days we could certainly be swayed to follow the arguments of some that prices have bottomed. However, for now, we feel more comfortable with the opinion that we have reached a trading plateau and if prices are going to change at all, our initial guess would be they would move lower rather than higher.
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