US Perspective—14.06.16
14/06/2016
www.themaxfieldreport.com
Last week saw packers ask higher prices again. According to sources, the week got off to an uneventful start, leading some pundits to question if packers had finally found the “top of the market”. However, by the second half of the week, buyers begrudgingly recognised that packers had no intention of trading at levels lower than their last reported trading levels, while efforts or requests to book additional volumes at steady levels were also refused by packers.
Overall, there were a moderate number of hides sold last week. The majority of sources we spoke to commented that they did not sell as many hides as the week prior. However, we did encounter a handful of sellers who were laying claim to enjoying a better week of trading than the week prior. Prices were roughly fifty cents to a dollar higher, while a couple of selections, not popular with tanners, were able to achieve increases of as much as a couple of dollars higher than the week prior.
What was of particular interest was that much of the business as mentioned above took place in the second half of the week, which under a “normal” week is “business as usual”. However, Chinese and Taiwanese tanners were celebrating their Dragon Boat Holidays at the end of last week and many pundits are of the opinion this further illustrates that leather business is better than tanners are indicating.
In the meantime, slaughter levels are hovering around the 600,000 head levels and as of this writing the added volume versus levels of a year ago does not appear to be hampering the efforts of packers to achieve their full asking prices. While in the meantime, popular opinion of the trade is that packers continue to possess one of their stronger sold forward positions entering this week. Elsewhere, we were able to round up a couple of isolated trades pending over the weekend as packers were laying claim to selling regular-weight HTS as high as $72, while trading on HNDC checked in at $48. The only other sale was a processor sharing they were able to sell HTS at $69.50.
The cowhide market has turned, with momentum returning to the side of producers. Overall, a number of sources shared that they had a number of bids last week at levels lower than their asking prices, which were countered at full asking prices. Meanwhile, the holidays at the end of last week hampered business a bit, as many tanners who remain reluctant to pay higher prices opted to delay buying decision until this week.
Overall, prices were roughly fifty cents to a dollar higher last week depending on the selection. As to quantities sold, the sentiment of the trade is mixed, as some sources are of the opinion producers easily sold a week’s worth of production, while other pundits are not nearly as optimistic.
As to our initial thoughts for this week, we would not be surprised if packers raised their asking prices again this week, as there continues to appear a decent amount of underlying interest. In the meantime, packers are sharing with us that they are trying to make sure they are not raising prices too quickly, as they want to avoid “killing” the momentum of the market. In the meantime, many pundits are starting to wonder if packer prices are not close to peaking, especially with slaughter forecast calling for levels to increase the next four-to-six weeks.
Elsewhere, we agree with the opinion of pundits in the cowhide market that there is likely to be some real upside in cowhide prices over the next several weeks, for no other reason than the fact that prices have reached such low levels. Many pundits are of the opinion that cowhides will be pulled higher by the firm big packer market, while we look for tanners who have the flexibility to utilise cowhides to be a bit more active in order to lower their raw material costs.
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