US Perspective – 31.07.18
31/07/2018
www.themaxfieldreport.com
Last week in the big packer trade, packers again entered the week in possession of large offer lists. Most packers reportedly offered a full complement of selections. However, the “special” offers that had been present for several weeks were noticeably absent; we understand that a decent number of hides were traded at the end of the previous week, allowing sellers to “mend” their sold forward positions.
As to interest last week, things started off a little better than the previous week and we spoke with a number of sources who said they were already seeing an improvement in the number of bids early in the week. By the second half of the week, sources reported seeing some broad-based interest from tanners from a number of countries. Traders that were active at the end of the previous week were also reported to be busy attempting to buy hides last week.
Overall, popular opinion of the trade is there were a decent number of hides changing hands last week. In addition, some pundits are of the opinion that there were some decent sales from the previous week that did not make it onto last week’s USDA Export Report. This had led to thoughts that this week’s report could reflect one of the largest sales weeks we have seen in some time.
With regards to trading levels, there were instances when packers were able to obtain prices slightly higher than their lowest levels traded in the past week to 10 days. Overall, we would call prices $1-2 higher than the previous week, depending on the packer and the selection.
Reports from members of the cowhide trade suggest offer lists from producers were mixed last week. We are aware of some producers who had noticeably smaller offer lists, while other producers still had offer lists that were fairly well populated.
With regards to interest last week, sources report it got off to a slow start in the first half of the week. However, by the middle of the week the number of bids improved, although producers did not see as much interest as those in the big packer trade last week.
There were a decent number of sales concluded last week, especially on HNDC, which appear to be in much better shape. There were also indications that HNC sales were starting to pick up. Members of the trade are not convinced that enough HBC has been sold. This selection appears to still be the weak link in the chain.
The look ahead
As to our thoughts for this week, it is very likely we will see smaller offer lists from packers and cowhide producers this week. In addition, we suspect packers will adopt a much firmer position. Any buyers looking for some “me too” business (sales at the lowest levels traded) will likely find packers quickly dismissing this idea.
With regards to attempts to raise asking prices, we believe this might be a bit premature, as two weeks of decent sales is not enough to warrant higher prices, especially given how poor sales were in the first six months of the year. In addition, harvest levels are showing no sign of easing and so it would not be the right time for any producer to withdraw from the market and not offer hides. A couple of weeks of larger harvest numbers and no sales can quickly erode a sold forward position.
At the end of the day, there is no reason for sellers to consider lower offers. However, our opinion is that you must continue to sell into this market and to put yourself in a better position for the fourth quarter, when interest should improve.
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