US Perspective—19.07.16
19/07/2016
www.themaxfieldreport.com
Packers started last week with prices unchanged from the week prior. However, by the middle of the week, it appeared packers were a bit more willing to negotiate prices and looking for interest that was within a dollar of their last traded levels. Unfortunately, for packers, the vast majority of buyers willing to share their price ideas, had ideas that were $2-$4 lower than where packers were pegging the market.
As to volumes sold last week, on the surface, most are calling it a sluggish week of trading. However, keeping in mind that many of the packers have access to direct business with some very large tanners these days, we would not be surprised if packers did succumb to the lower ideas of buyers, but they likely did this directly and in some decent volumes. It appears the only selections to hold steady last week were HNS and dairy steers, while all other selections appear as if they succumbed to lower prices, ranging from $1-$2 depending on the selection and the packer.
Elsewhere, reports from the cowhide trade are not much different, as the majority of sources we spoke with shared that interest last week was fairly lacklustre, especially at steady levels.
Opinions are mixed as to how many hides changed hands last week, as there were several unconfirmed rumours of at least one of the largest processors selling some substantial quantities at levels believed to be $1-$2 lower than the last reported trading levels.
We tend to believe that producers are likely to have more than ample offers again this week, while we look for asking prices to be close to where sales were concluded in the second half of last week. Slaughter levels last year in July and August averaged just slightly higher than 540,000 head, while forecasts by pundits suggest that slaughter levels over the next six or seven weeks should be close to 600,000 head per week.
If these suspicions should come to fruition, it would mean we would have an extra 250,000 hides or 425 containers to sell.
Considering that a sizeable majority of tanners continue to insist that their leather business is not equal to levels of a year ago, it is likely to mean that those selling hides will have their work cut out. This is leading some pundits to the opinion there is a real likelihood that we will have a soft market heading into the All China Leather Exhibition in Shanghai this year (August 31-September 2).
If we were a seller, we would be reaching out to those customers who have outstanding orders and offering them an opportunity to average down their purchases. The hope would be that this would ensure an orderly liquidation, in an attempt to avoid the requests for delays or cancellations that we have seen in the past.
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