US Perspective – 19.12.17
19/12/2017
www.themaxfieldreport.com
The trade talk
Reports from members of the big packer trade suggest that last week was almost a replay of the previous week. Sources share that offers from packers were mixed; those that did not offer the previous week opted to again not publish offers last week. The remaining packers published offer lists that were in line with the previous week. Producers appeared to be adamant about selling at no less than their asking prices.
One thing several members of the trade noticed about offer lists was that the shipping times on hides offered appeared unchanged from the previous week. This fuelled comments by some members of the trade that producers did not enjoy as many sales the previous week, which was confirmed on Thursday when the USDA Export Sales Report was released.
As to inquiries/interest last week, most sources were of the opinion that it was a repeat of the previous week, with not much happening overall. It is worth noting that we heard numerous sources claiming that packers could have sold a decent number of hides last week had they been willing to sell at a dollar or two lower than the last reported trading levels. None of the packers appeared inclined to do so, however.
In the meantime, it appears there were a few buyers still looking for raw material last week. They found packers unwilling to negotiate prices. The sentiment of the trade is that the business concluded with these buyers led to reports of some selections trading at slightly higher levels. Popular opinion of the trade is that the volumes traded were far from large.
Elsewhere, reports from the cowhide trade claim last week started with producers publishing offer lists in line with the previous week, both in terms of the number of selections offered and their asking prices.
As to inquiries/interest, the majority of sources we spoke with claimed it was sluggish at the start of last week. Although it improved slightly in the second half of the week, popular opinion of the trade is that there was only a limited number of hides changing hands last week.
With regards to trading levels last week, popular opinion of the trade is that the majority of the business concluded took place at steady levels. There were isolated reports of sales being concluded at slightly higher levels. As to the number of hides changing hands, the sentiment of trade is that it is unlikely producers sold enough to offset the number of cows in the harvest mix, which is running at some of the highest levels of the year.
The look ahead
There are only two weeks of trading remaining in the year (including the current one) and it is highly likely the Christmas and New Year holidays will interrupt trading. As to some initial thoughts for this week, we look for producers to continue with their efforts to convey a firm tone to market. However, after seeing sales fall short of the harvest in the last few weeks there is a growing sentiment in the trade that we could be looking at a correction in prices in the first half of January unless there is a sudden round of business before the end of December.
In the meantime, tanners in the shoe trade continue to report that orders placed by the major brands continue to fall slightly below their projected needs. This has been the trend of the past few months. As a result, many shoe tanners are not optimistic about leather orders for the first half of 2018. There continues to be a considerable amount of speculation that many tanners have already bought hides in an effort to avoid needing to buy hides for February/March shipment.
Elsewhere, reports from the upholstery segment claim that furniture business remains decent. This is fuelled by positive reports about the economies of China and the US. Nevertheless, we continue to hear reports that some automotive tanners will be looking to reduce their requirements following the holidays. Slumping auto sales in the US and Europe are weighing on this decision, although it appears we will see a slight increase in sales in China.
We are expecting the impasse in the hide market to continue this week. We are fully aware of claims by producers that they have been able to trade hides at higher levels in the past week or ten days. However, we believe the problem is that sales are not keeping pace with production, suggesting their sold forward positions are not nearly as strong as they were a month ago. This is why we remain of the opinion that there will likely be a correction in prices come January. There is a decent chance we could see all of the gains we have seen since September eroded.
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