US Perspective – 31.10.17
31/10/2017
www.themaxfieldreport.com
Members of the big packer trade saw last week start with packers still in search of higher prices. The majority of offer lists were unchanged compared to the previous week, while packers continued their efforts to convey a firm tone to the market. In the meantime, many members of the trade were somewhat confused by the size of packers’ offer lists, especially considering most packers were continuing to insist that they had been enjoying some decent sales and claiming they possessed strong sold forward positions.
As to interest last week, it initially appeared that there was some decent interest. However, once buyers were made aware that sellers did not intend to forgo their efforts to obtain higher prices, a number simply opted to withdraw their interest. As the week progressed, the consensus of the trade was that there were not nearly as many people willing to share prices ideas as there had been in the second half of the previous week.
Overall, popular opinion of the trade is that there were not as many hides changing hides last week, leading to thoughts that packers have slowly watched their sold forward positions erode over the course of the past month.
Elsewhere, reports in Europe claim producers there are continuing to face falling prices. The usual outlet for producers would be to sell to Italian tanners, but we are hearing from reliable sources that many of these are full of wet blue hides from the US. There were plenty of rumours swirling last week that some packers were selling direct to tanners in volume at levels of $51 for BRS/CBS, $53 for HTS and $57 for BBS. There were also rumblings of some packers looking for prompt shipment on several selections.
In the meantime, the common comment coming from most tanners in Asia is that they have little confidence in pending leather orders. There continue to be ample reports of tanners requesting to delay shipments or avoiding all telephone calls/emails from producers enquiring about them taking delivery of outstanding orders.
According to members of the cowhide trade, last week started with producers mostly looking to hold prices steady. There was speculation that some producers had more hides for sale than they were willing to admit, leading to thoughts that buyers with cash who were willing to consider volume business and were flexible as to when product could ship would be able to negotiate prices.
Several reports suggested that interest was lower than the trade expected. The popular opinion of pundits was that the business concluded last week was enough to clear the number of cows produced. It is worth noting that the number of cows in the harvest mix is following the usual trend and running at the highest levels of the year.
The sentiment of the trade is that sales last week were concluded at levels $0.5 to $1 lower than the previous trade levels. It will be interesting to see if producers reflect these lower prices in their offers this week.
The look ahead
As to some initial thoughts for this week, it is unlikely we will see any substantial change in the offer lists of packers. We suspect they will look to continue their efforts to convey a firm tone to the market. We are hearing rumours from some members of the trade that they are seeing the first cracks in the armour of packers. We will keep an eye on the situation to see if there is any credibility to these rumours.
Meanwhile, it looks as if packers will receive a small reprieve on harvest levels as live cattle prices jumped $5-$7 last week. This increase eroded most of the packers’ margins, which had been running at lucrative levels for several months. As a result, we look for packers to reduce their harvest intentions, which will likely start to back up cattle and force prices lower.
We recognise that packers’ intentions are to try to achieve higher trading levels. Nevertheless, it might be best for those selling hides to continue selling into this market in light of the number of tanners dragging their feet on taking delivery of outstanding orders and the general lack of confidence tanners have with regards to future leather orders.
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