US Perspective—24.11.15
24/11/2015
www.themaxfieldreport.com
Reports from members of the big packer trade claim there was a noticeable improvement in the number of buyers looking to buy hides last week, with sources sharing that buyers were coming from a wide range of countries. Overall, popular opinion of the trade is that packers had a successful week of trading and according to several sources it is likely that packers were able to sell their production.
Buyers recognised early in the week that packers and traders had no tolerance for prices lower than their last established trading levels. In turn, this forced a number of buyers to improve their ideas and by the end of the week we are aware of a number of instances of steady prices not being able to buy hides. A handful of selections were able to register price improvements of roughly a dollar, allowing those selling hides to ride the wave of momentum into this week’s market. Worth noting, this will be a holiday-shortened week of trading due to the Thanksgiving holiday on November 26. Historically, this is not known as a busy week of trading, while a large contingent of the US trade out of the office for two or two-and-a-half days observing the holiday.
It is a good thing sellers are enjoying an improvement in demand, as the number of cows in the slaughter mix is on the rise. In fact, last week’s cow slaughter at 120,000 head ties the largest week of the year, and the last time we saw such a large number was January. Elsewhere, reports from Asia claim a number of Chinese tanneries, especially larger tanners, have booked a decent number of hides the past two or three weeks, as current trading levels were deemed affordable, allowing tanners to average down their raw material costs. Sellers are interpreting the “sudden” interest as a sign that tanners need hides, while tanners insist leather orders are not improving.
Even though hide prices are down 40% and more since their record levels of last fall, a number of tanners continue to suffer cashflow issues, especially with payment from leather buyers continuing to run slower than normal. Also contributing to tight cashflow is the fact that many tanners have a considerable number of unsold drop splits. Overall, many tanners are attempting to convey a message that they now have adequate inventories of raw stock for the next two or three months considering current leather orders that continue to run well below levels of a year ago. This in turn is also encouraging a number of tanners to insist that they will close for longer than usual for the Chinese New Year holiday in early February in order to stretch their order books.
It is likely we may see a number of producers decide not to officially offer this week and encourage those interested in purchasing hides to bring their unsolicited ideas for consideration on a case-by-case basis. In the meantime, we are of the opinion that buyers and sellers have some strong opinions about the future direction of the market and as of this writing; buyers and sellers are not on the same page. That said, we look for a stalemate this week and it is likely this stalemate will carry over into next week. If this should come to fruition, there will be only a week to ten days when hides cannot be shipped to parts of Asia to avoid product showing up during holiday closures and it will certainly be interesting to see how the market responds.
At the end of the day, we remain of the opinion that if we were a seller we would continue selling into this market; however, perhaps those selling hides know something we do not and the next couple of weeks will be very interesting.
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