US Perspective - 16.1.18
16/01/2018
www.themaxfieldreport.com
Members of the big packer trade report that the number of enquiries/ bids appeared to have improved over the past couple of days, with several confirming they had more bids than they expected.
Packers conveyed a firm tone to the market, countering bids at full asking prices and it appears as if buyers had little choice but to succumb.
The number of bids this week were an improvement over the previous two to three weeks, however, we are not aware of any packers bragging they had great interest. Sales were no worse than steady, although packers might not have been able to sell a full week’s worth of production.
Reports of numerous selections of wet blue for sale appear as if they have been misstated. We have talked to sources who reported they were unable to obtain offers this week from some producers, while other producers were only be offering a few isolated selections and none of them for prompt shipment.
Reports from Asia claim there was a modest improvement in the number of buyers looking to buy hides, although the majority started with price ideas under the asking prices. However, they quickly discovered that packers were insistent on full asking prices and a modest number of hides sold.
Reports from the furniture trade claim interest on cowhides have slowed considerably the past few weeks, with sources not sure if this is due to the holidays or attributed to tanners exhibiting much more interest in Brazilian wet blue hides.
With regards to automotive business, most tanners appear busy, while many are reluctant to follow the higher ideas of producers, especially those buying HNS /BBS. There are rumblings that many tanners are incorporating wet blue and crust from Brazil to keep their raw material costs in line.
There continues to be speculation that tanners will come back from Chinese New Year looking to reduce soaking levels, attributed to the decline in sales of cars last year in the US and Europe.
Elsewhere, members of the side-leather trade continue to report mixed business for most shoe-upper tanners. Most tanners insist their leather orders are struggling to equal levels of a year ago, while we have heard that some of the large well-known tanners continue to enjoy decent orders, which are believed to have come at the expense of their competition.
Some smaller tanneries will be closing at the end of the week for CNY, attributed to a lack of orders. Tanners in the northern part of China are dealing with problems ranging from pollution issues, a lack of leather orders and dealing with heating, ventilation, and air conditioning issues that are affecting soaking levels.
However, it is not all bad news: there are reports many large tanners will continue to run all the way up until CNY and only take a few days off, as they are more confident about leather orders following the holiday.
Members of the cowhide trade report a slight improvement in the number of people looking to buy hides, but nothing compared with the big packer trade. Buyers continue to target lower prices, but producers appear as if they are adhering to full asking prices. There may have been a few more bids compared with the past couple of weeks, and a few more hides exchanging hands at steady levels.
In the meantime, the number of hides sold continues to fall well short of production levels, especially with somewhere close to 125,00 head of cows harvested this week.
Processors sold BRS at $52, while HNDC traded at $47 and HNC at $39. The only other trading was a couple of sales on HBC, with product in the North sold at $31, while sales in the south took place at $29.
THE LOOK AHEAD
The first full week of trading is “in the books” and producers remain in control of the market, refusing to succumb to the lower ideas of buyers and able to trade the market at steady / incrementally higher levels, depending on the selection and the packer.
Although the consensus is that there were more hides exchanging hands, we are not aware of too many pundits claiming sales equalled the harvest this week and if this is correct, we wonder how long producers can keep this going.
We are a month away from the CNY. It will be interesting to see how much follow-up interest there is the next couple of weeks, especially with the end of this week showing some promise.
Looking ahead, we were surprised by the lack of harvest on Saturday as the USDA was forecasting only 23,000 head.
This is unusual, as it follows last week’s 83,000 head (high due to the holiday – but usually an excellent indicator that beef demand is good).
However, packers were able to buy cattle cheaper this week while holding box prices steady and this should lend to thoughts that we will see harvest numbers north of 625,000 head next week.
There is speculation that the lacklustre interest we have seen since the end of November has eroded the sold-forward position of producers.
We have our reservations about the potential upside of this market, but considering the number of people who have tried to buy hides at lower prices and failed, it is difficult to call the market anything but fully steady. However, we still have concerns as to if we will see enough demand to keep pace with the larger harvest levels pundits are forecasting and that is why, if we were a seller, we would continue selling into the market for the next few weeks.
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