US Perspective—15.08.17
15/08/2017
www.themaxfieldreport.com
Reports from the big packer trade said offers were a mixed bag last week. According to sources, some packers refrained from offering wet salted hides, instead focusing on their wet blue production. We understand that some other packers had more than ample offers again last week. They also lowered their asking prices in order to align with recently traded levels.
Overall, members of the trade say interest last week was mixed. There is speculation that a few packers were aggressive for direct business and managed to sell decent quantities to tanners at lower levels. We are also hearing reports of some packers selling at levels well below their asking prices in an effort to average down their outstanding purchases and ensure customers would offer Letters of credit for more expensive product.
Other members of the trade claim they were disappointed with the level of interest they saw last week. This is leading to thoughts that this week’s USDA export sales report may fall short of the last couple of weeks. We saw the largest slaughter of the year last week and, taking the above into consideration, it appears unlikely that packers sold their production last week. We would call trading levels steady to $0.50-$1 lower.
Reports from the cowhide trade are similar to those in the big packer trade. There were a handful of producers with offer lists that were not nearly as populated as in the past two or three weeks. Most of these producers tried to hold prices steady. Most other producers appeared to have offer lists that were unchanged from the past couple of weeks. The majority of lists were fairly well populated, while producers were trying to trade as close to steady levels as possible.
The number of cows in the slaughter mix is not showing any signs of easing. Last week’s total equalled the third largest of the year; it will be interesting to see how producers manage the situation moving forward, bearing in mind that numbers are almost 8% higher than a year ago.
As to our thoughts for this week, we expect to see those producers who already have representatives travelling to Asia refraining from publishing offers. We also need to keep in mind that, as we move through the week, we will see more and more members of the trade depart for Asia. This will likely mean noticeably fewer hides being offered. We believe those travelling will likely have some “special” offers for the customers they are visiting.
In the meantime, outstanding orders that can ship appear to be at a premium as we continue to hear reports of tanners delaying the opening of Letters of credit for a variety of reasons. Regardless of the excuse, the real reason is that the price of these orders is much higher than recent trading levels. As a result, sellers have little choice but to be creative in their efforts to keep product moving.
Elsewhere, cattle weights are on the rise. The report released by USDA for the week of July 29 had steer carcass weights up 12 pounds at 878 pounds, remaining eight pounds under last year. Heifers were nine pounds under last year. Pundits continue to lean towards thoughts that there will soon come a point when carcass weights will reach the levels of last year.
The All China Leather Exhibition (ACLE) and the busy season is approaching for tanners. That being said, the perception of the trade is that there are ample quantities of unsold hides, both wet salted and wet blue. This is leading to thoughts that there is a strong likelihood that there will be a decent round of business concluded in the near future.
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