US Perspective—01.08.17
01/08/2017
www.themaxfieldreport.com
It appears as if packers sold a substantial number of hides in the second half of last week, with a sizeable number of hides sold for prompt shipment. Attempts to book additional quantities were being refused by packers as they were laying claims to have sold more than enough hides.
Overall, the sentiment of the trade is that packers sold enough hides to address some of their immediate pressing needs. This is leading to thoughts that sales will likely exceed the slaughter when the USDA Export Sales Report is released next Thursday, while prices were down anywhere from $1-$6 per hide, depending on the packer and the selection.
Veterans of the trade are aware that June through August has never been known as a strong demand month for hides. Historically towards the end of July and into August, we usually start to see signs of leather orders being placed for the upcoming winter season; however, numerous sources report no signs of this coming to fruition as of yet.
In the meantime, shoe-tanners as a group appear as if their business continues to fall short of levels of a year ago as there are claims by some tanners that their leather orders are down 30-50%. (However, it should be noted that some of these tanners are some of the largest in China and are reported to have been very busy buying hides in recent days). Meanwhile, the handbag business appear as if it is close to levels of a year ago; however, we understand there has been a shift towards lower-grade hides as opposed to big packer BBS to make this product.
Elsewhere, the furniture business appears to be decent for most tanners; opinion of the trade is that better economic numbers in China and the US are driving this business. Meanwhile, business for automotive tanners appears mixed at best. We have heard that some tanners continue to enjoy decent business, while others are claiming that demand from automakers is lower for the third quarter, forcing tanners to inform their suppliers they will not be taking as many hides.
Reports from the cowhide trade claim buyers this week made their best efforts to pressure sellers into accepting sizeable discounts. Producers were in possession of much stronger sold-forward positions than their big packer counterparts and were able to “fend off” aggressively lower ideas from buyers.
We suspect the end of last week could not come fast enough, especially for packers as they saw one of the largest one-week price declines in recent memory. As to expectations for next week, we look for packers to have a firmer posture. In the meantime, the big question will be if packers are willing to trade additional quantities at their last traded levels. We suspect offer lists may not be nearly as populated and tend to believe that packers will likely not be willing to trade the market any lower than levels obtained last week.
There is always the possibility that some packers will attempt to parlay the decent interest last week and the unsuccessful attempts from buyers to buy more quantities to raise their asking prices. Keep in mind that the number of animals slaughtered this year exceeds sales by 1.5 million hides, which includes yesterday’s USDA Export Sales Report. That is why we are not about to hang our hats on one decent week of sales as enough for packers to “ground” the market. We lean towards the opinion that although prices may have stabilised for the moment, we are not ready to agree that we have seen the lows of the year; not yet anyway.
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