US Perspective—18.10.16
18/10/2016
www.themaxfieldreport.com
Last week saw a decent amount of interest in the big packer market and with packers laying claims to possessing strong sold-forward positions and no interest in chasing the lower ideas of tanners, it appears there was a decent amount of sales concluded last week at levels fifty cents to a dollar higher than the week prior.
It is likely that packers were able to clear at least a week’s worth of production and keep in mind that this is not an easy chore, especially with harvest levels running close to 10% higher than levels of a year ago.
Although sellers of wet blue share that they saw some modest interest last week, we are under the impression that producers did not enjoy nearly as much success as they did selling wet salted hides and likely were not nearly as successful in raising prices. Elsewhere, something worth keeping an eye on as we move through the final two-and-a-half months of the year are reports that cattle hide weights are on the rise and are rapidly increasing.
Reports from the cowhide trade are calling interest last week disappointing for the most part, especially compared to the interest seen for big packer hides.
As to our initial thoughts for this week, from our vantage point it certainly appears that packers have momentum on their side. What we find impressive is the fact that since the end of March, slaughter levels have been averaging 7%-10% higher than a year ago and prices of big packer cattle hides have actually improved over this duration. Year-to-date, we have seen a million more hides produced than a year ago. In the meantime, looking at big packer hide prices from last Friday versus a year ago, we see that prices are up anywhere from $2-$3 on some selections, to as much as $5-$7 on other selections. So at the end of the day, we have a market where production is up, and prices are up; however, leather business is down or stagnant.
Our contention is that leather prices have approached levels deemed “affordable” by many of the brands, and we continue to hear reports of many of the brands looking to spec more leather into their articles. In addition, sources report there has been a decent run on furniture upholstery leather here the last three or four months and this, coupled with decent automotive demand, has kept this market firm for the last six months. We would hate to think where prices would be if leather business was good.
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