US Perspective – 27.2.18
27/02/2018
www.themaxfieldreport.com
Reports from members of the big packer trade claim that, as expected, packers’ offer lists last week were noticeably more populated than in previous weeks. The majority of packers had a full complement of selections. Packers started last week with aspirations to hold prices steady; most opted to leave asking prices unchanged from previous weeks.
According to sources, interest at the start of last week was lacklustre. This was likely a result of many Asian tanners being out of the office until the end of the week for the Chinese New Year holidays. We are aware of several tanners who did not intend to return to their offices until this week.
By the middle of the week, there was speculation that at least a couple of packers were a bit more anxious and were looking to conclude some volume business. As the week progressed there was growing sentiment that most packers were willing sellers. This led to thoughts that bids a dollar under the official asking prices of packers would be successful as the week came to a close.
In the meantime, the challenge facing packers is the softer tone of the market during the second half of the week. However, with most trying to minimise prize concessions to roughly a dollar, there was likely more business not concluded than business booked last week, especially considering that most buyers’ price ideas were $2-3 lower than asking prices. In some cases, they were even lower.
Overall, the consensus of the trade is that it is highly unlikely that packers cleared their production last week, even though we saw the smallest full week of harvest of the year. This led to speculation that we would see offer lists even more populated this week.
As to trading levels last week, we are of the opinion that most packers would like to lay claims to selling at levels steady to a dollar lower than the previous week. However, there are plenty of rumours of packers selling directly to tanners at prices $2-4 below their asking prices.
We are very interested in the shipping times listed on offer lists this week. We suspect some packers will be looking for shipments much earlier than they have been advertising in recent weeks.
Elsewhere, reports from the cowhide trade claim producers started last week with a mixed bag. We heard that some producers opted to leave offer lists unchanged with the previous week, hoping to counter bids as they came in, while other producers lowered their asking prices by $1-2, depending on the producer, as well as the selection.
Overall, members of the cowhide trade say they are unaware of any producer who has found it easy to sell hides in 2018. We continue to hear that there is a sizeable overhang of unsold hides globally. Many larger cowhide producers were reportedly in Milan last week looking to conclude some volume business for prompt shipment.
In the meantime, sources report interest in cowhides last week was slow to start with many Asian tanners still on holiday. The few buyers willing to share their price ideas were taking aim at lower prices and bidding $4-5 lower, depending on the producer and the selection.
As to sales last week, most sources reported a difficult week of trading as sellers struggled to get to grips with the lower price ideas of buyers. We heard of a few producers opting to “pull the trigger”, leading to rumours of volume business concluded on HBC at what appears to be very low levels.
The look ahead
As we set out on a new week of trading, it is set to be a very interesting one, especially as the start of the APLF exhibition in Hong Kong is just two weeks away. There are a number of producers entering this week with sold forward positions not nearly as forward as they have been advertising. As we mentioned above, we are very interested to see the shipping times on offer.
With APLF on the horizon, we are aware of several members of the trade who will be departing for Asia this weekend in order to meet with customers prior to the fair. It will be interesting to see if these producers will be aggressive this week, or if they will wait to package some “special” officers when they meet their preferred customers next week.
The other variable working against producers this week is the harvest. Beef demand has exceeded expectations in the past couple of weeks in spite of the fact we still have a month to go in the Lenten Season. This has led to thoughts that we could see harvest levels move back closer to the 600,000 level on a consistent basis in the next few weeks. This would mean more hides for producers to sell.
At the end of the day, we remain of the opinion that we are in a buyer’s market. Until we see demand from tanners improve, we would be looking to sell into the market. We continue to believe your first sale is likely to be your best sale.
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