US Perspective—09.05.17
09/05/2017
www.themaxfieldreport.com
Last week started with a number of producers in the big packer trade expecting a decent amount of carry-over interest from the week before, which incidentally was the largest week of combined sales for the year, in spite of the fact much of Asia was on holiday. As a result, packers opted to leave their offer lists unchanged with the week prior, while a few decided to reduce the number of selections they would offer.
Overall, the week got off to a disappointing start with only a handful of buyers willing to share their price ideas and for limited quantities. Initially, producers were reluctant to consider lower prices, especially after the declines experienced the week prior. However, once reaching the halfway point of the week, it appears packers had a change of heart and became much more aggressive in their attempts to generate business.
Interest in wet blue hides paled in comparison to the week prior.
According to sources, it appears packers were able to conclude a moderate amount of direct business in the second half of last week. As to trading levels, members of the trade reported them to be roughly $2-$3 lower than the week prior. As to the number of hides changing hands, popular opinion is that compared to the two or three weeks prior to last week, interest was certainly better; however, the consensus of the trade is that it is unlikely packers sold a week’s worth of production.
Reports from the cowhide trade were similar to those in the big packer trade at the start of the week, as producers were hopeful that a strong week of trading the week prior would provide producers with an opportunity to “ground” the market. Sources report the week started with most producers opting to leave offer lists unchanged for the most part; however, by the halfway point in the week, it was becoming apparent to producers that they would have to be willing to negotiate prices if they were going to sell hides.
The good news for those selling hides is that the miscellaneous holidays in Asia have now passed and we should have three “holiday-free” weeks of trading until the US observes Memorial Day on May 29. In the meantime, slaughter levels appear as if they are poised to start challenging the 600,000-plus head level on a consistent basis, as May through September tend to be strong beef demand months.
We suspect those selling hides would like to believe that considering the recent decrease in prices that we are at the bottom-end of the trading range. However, we tend to believe there are still too many sellers entering this week with precarious sold-forward positions, thus leading to thoughts it is likely sellers will have their work cut out for them this week if they are to establish some sort of “bottom” to this market, as rising slaughter levels will certainly test their sold-forward positions.
Elsewhere, there continue to be complaints about low split prices, a continuation of pollution issues (North China), rising labour costs, and unfavourable exchange rate as causing additional problems for tanners. The good news is that with hide prices down 15% or more since the APLF exhibition, we tend to suspect that tanners are able to “lock in” some decent profits in spite of these negative variables.
The other challenge facing sellers is that those who sold hides prior to the Hong Kong fair are facing their own set of problems. These problems range from reports of some sellers looking to delay letters of credit, requesting to renegotiate contracts or refusing to acknowledge outstanding higher proceed contracts. This is why we suspect producers will likely have their hands full this week.
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