US Perspective - 12.06.18
12/06/2018
www.themaxfieldreport.com
Reports from the big packer trade last week claimed that despite two weeks of larger than expected sales, most packers came out at the start of the week with offer lists that still appeared to be fairly populated. Sources also shared that large offer lists were accompanied by claims that several packers also lowered their asking prices by roughly a dollar compared to the previous week.
In other news, there was a lot of chatter about the large sales of the past couple of weeks, with several members of the trade of the opinion that a couple of the packers who had been carrying a large number of unsold hides concluded some voluminous type business during this period in order to get their houses in order.
Many members of the trade claim these volumes were sold at trading levels well below those reported by other packers. When members of the trade challenged the packers suspected of selling the large volumes at “cheap” levels, the packers responded that they were countering a large number of bids at prices quite a few dollars higher than some of the levels being reported on our price guide.
What we find intriguing is that despite strong sales in the past couple of weeks, most packers have lowered their asking prices in the last three weeks. We have seen asking prices drop by $5-8, depending on the packer and the selection. We also heard reports last week that some of the packers who had claimed to possess very strong sold forward positions offered a limited number of hides to customers at prices several dollars higher than levels on our price guide. However, by the end of the week many of these packers appeared to recognise that their price ideas were well above attainable levels. Towards the end of the week they sold hides at levels equal to those reported on our price guide, and perhaps lower, if rumours we hear are correct.
At the end of the day, there are mixed opinions as to how many hides were sold last week. With regards to trading levels, most pundits are calling prices anywhere from steady to a dollar lower than the last reported trading levels. Harvest numbers continue to run at unseasonably high levels, with last week’s total the second largest of the year. Packers continue to register record profits with some sources claiming margins are approaching close to $400/head.
Elsewhere, reports from members of the cowhide trade claim producers entered last week in possession of large offer lists which contained most if not all the selections producers are able to produce, and in large quantities. With regards to asking prices, sources claim many producers are keeping discounts to a minimum, while others are keeping prices unchanged and are preferring to counter bids as they are presented.
As to interest last week, a combination of a general lack of interest and reports of new pollution problems in Northern China resulted in another disappointing week of sales. We continue to hear of producers dealing with problems from tanners. These include market claims, requests to delay shipments, requests to renegotiate contracts and cancelling of contracts.
Meanwhile, the number of cows in the harvest mix is not showing any signs of easing. Last week’s total was 130,000 head, one of the largest numbers of the year. Nobody is sure when the large numbers will end.
The look ahead
As to our initial thoughts for this week, we do not think any of the fundamentals of the market have changed. We are aware of some packers who insist they have sold a fair number of hides in the past two to three weeks and are claiming to have sold their production until the Labor Day Holiday in the US (September 3). We are a little sceptical of such claims, at least for now.
With regards to prices, there is no questions that hides are generally inexpensive. Several members of the trade have wondered how much lower prices can go before those members of the trade with some cash available decide to buy hides and find places to store them until market conditions improve.
As we have been saying for several months, it comes down to demand. Until we see some sustained demand from tanners, it is likely the market will remain adrift.
Share this story:
