US Perspective—03.11.15
03/11/2015
www.themaxfieldreport.com
Last week was a busy week on big packer hides and packers likely saw their second consecutive week of sales exceeding slaughter. The week started out with the majority of buyers with ideas $2-$3 under the asking prices of packers. However, right away, buyers found sellers not willing to accept such large discounts and those buyers willing to improve their ideas appear as if they were able to buy hides last week.
It appears HNS and BBS were able to hold their value, while it appears packers were able to move decent quantities of HTS, BRS, CBS and heifer selections at levels $1-$2 lower than the week prior.
If there is a problematic selection for packers, it is Jumbo and Super-Jumbo steer selections. Unfortunately, for packers, cattle coming to slaughter are weighing roughly 30-35 pounds heavier than a year ago. Meanwhile, the number of cattle weighing over 800 pounds in feed yards is 8% higher than a year ago. Expectations are that cattle hide weights are likely to remain heavier than a year ago and the spread between regular-weight steers to Jumbo and Super-Jumbos is likely to narrow.
Packers saw their hands forced last week when marketing Jumbos and Super Jumbos as trading levels were anywhere from $3-$5 lower and popular opinion of the trade is it is likely there are still a number of these types of hides that need to be sold this week.
Elsewhere, reports from members of the cowhide trade also report a decent amount of interest last week at the start of the week, but like buyers looking to buy big packer hides, most buyers had ideas $2-$3 under the prices of producers.
By mid-week, buyers recognised that sellers did not have much interest in discounting the prices of plump cowhides. It appears there are still enough problems (shipping and timely letters-of-credit openings) surrounding HNC, for buyers with money and the willingness to take prompt shipment to buy at lower prices.
As to our thoughts for this week, sellers in general are leaning towards the opinion that prices have bottomed and those buyers still looking for “bargains” will be disappointed. In the meantime, we are not convinced the market is poised to see any sizeable rebound in prices as we are not aware of any sizeable improvement in leather demand.
That said, we tend to believe that a good portion of tanners were able to replenish their inventories over the course of the past couple of weeks, and we could see interest slow this week. Sellers will need to be careful not to overplay their recent good fortune by digging their heels in and refusing to sell, resulting in their sold-forward positions starting to erode. We remain of the opinion that there has not been any real change in the overall fundamentals in the market.
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