US Perspective—16.08.16
16/08/2016
www.themaxfieldreport.com
Interest in the second half of last week slowed; the lion’s share of hides changing hands took place earlier in the week in stark contrast to previous weeks. Pundits are of the opinion there were more hides sold last week than the week before and the sentiment of the trade is that if packers did not sell a week’s worth of production last week, they only fell a bit short.
The majority of hides sold at levels steady to a dollar lower for most selections. The only exception to this would be jumbo and super-jumbo HTS and BRS, for which producers had to concede to ideas $2-$3 lower than their last reported levels, depending on the selection, the packer, and the plant location.
Reports from overseas claim that the week began with a decent number of tanners interested in buying, with the vast majority looking to buy at cheaper levels. According to sources, tanners with price ideas of $2-$3 within the asking prices of sellers found those selling hides a bit more willing to negotiate prices, while tanners with ideas $4 and more away from the asking prices of packers found sellers to have little or no patience for such an idea.
We continue to hear rumours that the leather business is exhibiting signs of improving for some tanners, while sources claim that this is not yet widespread. This is leading to speculation by many pundits that there is a good chance we will see some improved demand for hides in the fourth quarter of the year.
Reports from the cowhide trade are similar to the big packer trade as sources share that producers saw quite a bit of interest early in the week, while interest slowed considerably the second half of the week. Overall, when checking with various members of the trade, producers appear rather content with the number of hides they sold earlier in the week and this is leading to speculation by many pundits that prices may have found the bottom-end of the trading range.
Many members of the trade were leaning towards the opinion that last week was likely to be one of the best for sales in the past two or three months; it will be interesting to see if producers are able to parlay this into higher prices in the near-term.
Slaughter levels continue at roughly 10% higher than a year ago and we suspect that it will be important for packers to continue selling into this market as the expectations of experts is that we will continue to see weekly slaughter levels at 580-600,000 head at least through September. Elsewhere, next week we will see the first few members of the trade begin to travel Asia. Usually, this will mean that offer list will be limited this week. We are of the opinion that the next two or three weeks are going to provide the trade with a much better picture of the market. Those travelling will be able to judge the raw material inventories of tanners, while it will also be interesting to see exactly how many drums are turning.
The upcoming All China Leather Exhibition should provide the trade with a much better idea as to what we can expect for leather orders over the next few months. We continue to have guarded optimism about future demand for hides. That said, it will be interesting to receive reports about the inventory levels of tanners and if their inventories are anywhere close to being as low as some of the packers suspect; we would then change this opinion to moderately bullish for the fourth quarter.
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