US Perspective—26.05.15
26/05/2015
www.themaxfieldreport.com
Reports from members of the big packer trade continue to talk about a general lack of interest and the consensus of the trade is that last week was likely one of the slowest trading weeks of the calendar year. Overall, buyers appeared reluctant to follow the higher ideas of sellers, while sellers showed no interest in chasing the few bids from buyers at levels under their last reported trading levels.
In the meantime, we are hearing that the stability in the market is allowing sellers an opportunity to address some of their issues with problematic customers. We have heard reports of some sellers finally receiving letters of credit that had been delayed for some time, while we are also hearing many have successfully addressed situations of certain buyers looking to delay shipment.
As mentioned above, sales for the week will likely fall well short of the slaughter that finished the week at 566,000 head. Meanwhile, as it pertains to trading levels, we will call prices steady for the most part, to incrementally higher on a few isolated selections.
Members of the trade overseas report that higher price ideas from sellers relegated many tanners to the sideline this week. Elsewhere, tanners report their leather orders continue to fall well short of levels of a year ago, while many also continue to report that liquidating their drop splits remains a serious problem. Considering summertime is the slow season for most tanners, this is leading many to have a pessimistic outlook for the next two or three months.
We continue to see several mixed signals in the market place, leading us to question how long sellers will be able to maintain this moving forward.
Fundamentally, we have not seen any major improvement in leather business. This leaves us to questions the upside potential of this market. We support this argument by the fact that sales of wet-salted hides to China have fallen below 200,000 hides in each of the last two weeks, while we continue to hear reports that Chinese domestic leather demand is off by as much as 20%-30% versus levels of a year ago.
The drop split market remains under pressure: sources continue to report that prices are down by 40%-50% and possibly more on certain selections versus levels last fall. We continue to hear reports of tanners holding large unsold inventories of splits and until this situation improves it is difficult to follow arguments for higher hide prices.
We suspect sellers will likely continue their efforts of conveying a firm tone to the market. Meanwhile, a shortened week of slaughter this week could not come at a better time for those selling hides, especially after this week’s dismal sales. We look for buyers to “pick and choose” at offer lists, as we do not see buyers in a rush to pay higher prices. It is likely we will see another lacklustre week of sales, as both buyers and sellers wait for the other to blink first. As to which one blinks first, if we were to guess, we lean towards it being sellers.
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