US Perspective – 05.06.18
05/06/2018
www.themaxfieldreport.com
Reports from members of the big packer trade claim last week started out slowly, with the US observing its Memorial Day holiday last Monday (May 28). As expected, packers in Asia refrained from offering until Tuesday night, while in the US they waited until Wednesday. Sources shared that most packers appeared to still have a full complement of selections on offer, with several of them available for prompt shipment.
Sources are also sharing that there appeared to be an unusually large numbers of heifers offered last week. In addition, there were claims by several members of the trade that many packers seemed to be looking to sell large quantities of hides and that many of these selections were for prompt shipment. Offers of wet blue hides were not nearly as plentiful as offers of wet salted hides. Several producers claimed to have enjoyed better-than-expected business, allowing producers to have over one million wet blue hides outstanding as of last week’s USDA Export Sales report.
With regards to asking prices, sources reported that price ideas from packers were all over the board last week. We are aware of some packers who opted to leave their asking prices alone, while we understand one packer who had already succumbed to some substantial decreases reduced their asking prices again, by $1-2, depending on the selection. According to sources, this packer has reduced prices by $5-8 over the past three weeks.
As to interest last week, most sources claim the number of bids was disappointing. We heard a number of reports that when packers attempted to counter bids, prospective buyers simply withdrew their offers. The overall sentiment of the trade is that trade last week was uneventful. The business that was concluded appears to have taken place at $1-2 lower than the previous week. It is highly unlikely packers sold their production last week.
Reports from members of the trade in attendance at last week’s Guangzhou Shoes and Leather Fair say the show came and went without much fanfare. Reports claim visitor numbers were down for both domestic and international visitors. Sources also share that foot traffic was decent, which has been attributed to the number of tanners in attendance. Tanners reportedly came to the show in part to see how other tanners were doing, as well as to meet and see what shoe manufacturers were doing.
Sources claim that shoe fashion at the show suggests next year will continue to be heavily influenced by fabrics and synthetic materials. There was some chatter about the possibility of more shoes made from leather due to leather prices becoming more competitive.
Last week’s USDA Export Sales report brought some surprises as sales of wet salted hides hit a marketing year high. Meanwhile, sales of wet blue hides were the third largest of the year. Combined sales were the largest of the year. The other side of the report was shipments; shipments of wet salted hides were a low for the quarter, while combined shipments were also a low for the quarter.
Members of the cowhide trade have a similar story to that of their big packer counterparts. Sources share that the week got off to a slow start due to the Memorial Day holiday. The sentiment of the trade is that most producers entered last week in possession of well-populated offer lists. This led to speculation that most producers did not possess strong sold forward positions.
With regards to interest last week, most sources claimed the number of bids was disappointing. Most of the buyers willing to share their ideas continued to bid prices lower than the last reported traded level. Overall, sellers struggled to conclude business, leading to thoughts that it is highly unlikely that producers were able to liquidate their production last week. Trading levels were down anywhere from $1 to $2, depending on the producer and the selection.
The look ahead
As to our thoughts for this week, we fully expect to see harvest levels return to unsea-sonably high levels. This can be attributed to packers registering some of their largest profits on record and likely challenging levels we have not seen since 2012. It is very likely we will see the majority of producers enter this week in possession of large offer lists with a fair number of hides available for prompt shipment, especially cowhides.
Elsewhere, temperatures in the US are on the rise. These warm temperatures have ar-rived earlier than normal and with several producers having large number of hides in their warehouses we expect producers to be pressing customers to take delivery of their outstanding orders.
There still seem to be some unresolved problems in the lower grade market. Many pro-ducers are reported to have been forced to sell some hides for a second or third time. It appears most of the big packers are not panicking; many have been allowing buyers with older, more expensive contracts to average down and it appears this strategy is proving to be successful for now.
At the end of the day, our opinion of the market has not changed in a number of months. With the harvest expected to continue at unseasonably high levels and numer-ous questions surrounding leather demand, the best advice we can give those selling hides is to continue to sell into this market.
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