US Perspective - 07.08.18
07/08/2018
www.themaxfieldreport.com
Last week in the big packer trade, the offer lists from many packers were much smaller than the previous week. The big surprise was that a few producers opted not to publish an offer list last week. Overall, comments from the trade were that the number of loads offered last week was noticeably lower than in the previous few weeks. The shipping times listed were much further out than previous weeks.
Asking price were mixed. Sources shared that they were aware of some hard-to-sell selections for which packers left asking prices alone. Asking prices on more popular selections were $1-2 higher.
With regards to interest last week, things got off to a low start with members of the trade blaming this on a lack of offers and higher asking prices. By the time we reached the middle of the week, it was clear the number of bids was falling well short of what we saw in the previous few weeks. There was little improvement in the second half of the week.
As a result, it is unlikely that packers cleared their production last week. The USDA Export Sales report, which was released on Thursday, showed sales were half of what the trade was expecting, casting a huge shadow of doubt over the market. We will wait and see if this results in a few more hides being offered this week.
It appears the limited number of sales last week were concluded at steady to slightly higher trading levels. The packers offering hides last week refused to sell at their lowest trading levels, instead insisting on achieving their full asking price.
Elsewhere, reports from the cowhide trade claim producers entered last week with offer lists that were less populated than the previous week. Several producers appeared to be much better sold on HNDC and on HNC, albeit to a lesser degree. With regards to asking prices, they were steady (HBC) to higher (HNDC), while the shipping times on the hides offered were several weeks further on than recent offering lists.
As to interest last week, most sources we spoke with said interest was disappointing in the first half of last week. Pundits blamed the lack of offers and firmer asking prices for this. Unfortunately for those selling hides, interest did not improve in the second half of the week. It is likely producers failed to liquidate their production, so it will be interesting to see if there are more hides for sale this week.
The look ahead
As to our initial thoughts for this week, many members of the trade are confused about what exactly is going on in the market. Over the past two to three weeks we had claims from those selling hides that they had enjoyed some stellar interest from tanners, only to see the Export Sales report contradict these claims by posting some of lowest volumes of 2018 so far.
Of course, many reasons and excuses are being presented by the trade for the discrepancy in the numbers, but we strongly believe that there is a considerable amount of “smoke and mirrors” being used by those selling hides. We are not confident in the advertised sold forward positions of packers and processors as we enter this week.
In the meantime, we are just over three weeks away from the start of ACLE in Shanghai and we should start to start to see members of the trade departing for Asia in the middle of next week. We suspect there are still a number of problems in Asia related to outstanding contracts, so sellers will look to get these problems cleaned up before the show starts.
We will be very interested to see offer lists this week. As we have mentioned, we are questioning how much business has been concluded in the past two to three weeks and unless we see a decent amount of interest prior to ACLE, we remain of the opinion that our temporarily firm market is a “dead cat bounce”. We could see prices drift lower before the trade gathers in Shanghai.
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