US Perspective—17.07.18
17/07/2018
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week saw packers enter the week, once again in possession of offer lists that appeared well populated and most appeared as if they had a full complement of selections on offer, with many available for sale in sizeable volumes and for prompt shipment. Most of the packers adjusted their price ideas by $1-$2. However, it is worth noting, that some of the packers have been a bit more reluctant to lower their price ideas the past several weeks. We also heard a number of claims accusing several packers of making “special” offers to some of their preferred customers.
Elsewhere, the number of wet blue hides offered is rising weekly, attributed by most pundits to the lack of sales over the course of the last five weeks, with sales falling well short of weekly production numbers. We find it very interesting that producers were apprehensive about considering sizeable discounts on wet blue hides, despite documented reports of lower trading levels on wet-salted hides.
The consensus in the big packer trade is that once again with the number of bids disappointing and packers reluctant to succumb to huge price declines, it is highly unlikely that packers cleared their production again last week, while trading levels for the most part reflected levels $1-$2 lower.
With regard to the cowhide trade, sources report that offer lists from producers appeared as if they were still fairly populated. Producers entered last week unwilling to accept lower trading levels, with most producers trying to convey a message that prices were at the bottom of the market; however, towards the end of the week, we were starting to see some members of the trade questioning this mentality. It will certainly be interesting to see how long producers are willing to stay committed to their game-plan should competitors start to exhibit some weakness.
Pollution issues remain a major concern for many tanners, especially in the northern part of China. We are hearing reports from some sources who claim things are actually “tightening-up” in several places in China. This is of concern for many cowhide producers as a number of tanners in the areas affected are buyers of cowhides and lower grades. In fact, sources claim there are even a number of large Chinese tanners who are also dealing with pollution issues and in order to avoid any problems, are increasing their purchases of Brazilian wet blue hides in order to ensure their effluent levels stay within acceptable levels, not to mention they are buying this material at very cheap prices, which is taking away demand for US cowhides and lower grades.
We are struggling to find many positives in the market. We expect producers to enter this week again in possession of large offer lists, while we also suspect several producers will have a number of selections they are looking to sell in volume and for prompt shipment. It does not appear as if packers have any intention of lowering harvest levels as they continue to register lucrative profits, and with demand for beef exceeding the expectations of even the most bullish pundits and plenty of market-ready cattle available for harvest, we do not believe we will see the usual gradual decrease in the harvest following the 4th of July holiday.
Producers share that problems surrounding outstanding orders continue to increase at an alarming rate, and we have heard from a number of producers that they now dread looking at their phones and emails, as it appears the lion’s share of correspondence is about problems. As a result, many producers are attempting to “stay ahead of these problems”, contributing to rumours of some very cheap business well below the market concluded with customers in order to allow the customer to average-down their outstanding sales. This of course only lends fuel to the argument for even lower prices.
Meanwhile, we are now in the “dog days” of summer and we tend to suspect that over the course of the next three or four weeks that we will continue to see large harvest numbers, minimal interest from tanners and a strong likelihood that we will continue to see prices of hides drift over this time. Our hope is that by the time we reach the second week of August that a return of Italian tanners from their annual holidays and the trade gearing up for the All China Leather Exhibition that is a little more than six weeks away, we might start to see an improvement in inquires and interest and hopefully the bottom of this market.
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