US Perspective—27.09.16
27/09/2016
www.themaxfieldreport.com
The US big packer trade reported an improvement in interest as the number of buyers looking for hides improved substantially compared to the previous two or three weeks. The majority of interest to start the week was running at levels $2-$3 under the last established trading levels of packers; buyers were attempting to test their resolve of sellers.
As the week progressed, packers countered the lower ideas and the reaction of buyers was split. A decent number of buyers begrudgingly improved their ideas to steady levels, while other buyers opted to walk away leaning towards thoughts that prices would eventually decline to their price ideas.
Overall, packers enjoyed a decent week of sales last week and we spoke with a number of sources laying claims to moving a decent number of hides. In the meantime, there continue to be reports claiming packers still need to sell wet blue hides and that there are still a decent number of heifer hides to sell.
Elsewhere, reports from the cowhide trade last week are mixed. We have talked to some producers who are laying claims to enjoying a decent week of sales, while we have spoken with other members of the trade sharing that they did not see as much interest as they were expecting last week.
There are rumblings in the trade that cowhide producers in Europe have not had as much success liquidating their cowhides the past few weeks and several producers were supposedly pushing for sales this past week. In addition, there are reports from Brazil that producers of wet blue have not seen sales keep pace with production the past couple of months. This is leading to speculation that producers will likely have to succumb to lower levels and if the aforementioned is correct, it is likely we could see cowhide producers in the US struggle to conclude business at their last traded levels.
As to our initial thoughts for this week, we continue to lean towards the opinion that producers collectively as a group have been unable to liquidate their production on a regular basis for the past few months. This coupled with slaughter levels running above levels of a year ago and opinions that the leather business is, at best, only equal to levels of a year ago, has many members of the trade leaning towards the opinion that there is more downside potential to this market as opposed to upside.
In the meantime, when checking with various members of the trade we still do not have an overwhelming demand by tanners to ship their outstanding hides. This leaves us to suspect that this is confirming that business is not “great”. In fact, we would tend to think that if tanners had any inclination that leather business was going to improve substantially, many would be looking to buy hides considering current trading levels and current production would yield some of the best quality hides of the year.
That said, we look for sellers to continue their efforts to convey a firm tone to the market. However, given the fact that slaughter levels do not appear as if they will be easing any time in the near term, it leads us to wonder how long sellers are willing to continue this effort. That is why if we were a producer, we would be looking to sell into this market, especially to regular customer who have a good reputation for taking delivery of their outstanding product.
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