US Perspective—11.09.18
11/09/2018
www.themaxfieldreport.com
With a holiday at the start of last week (Labor Day), offers were delayed by a day. In addition, much of the US trade was returning from the All China Leather Exhibition in Shanghai last weekend and this, coupled with the holiday, made for a very slow start to the week.
Several of the packers started to appear as if their posture was easing on the last day of the ACLE and this was accompanied by reports that there was a decent number of bids late the week prior. Many of the packers appeared as if they were at least willing to listen to reasonable ideas from prospective buyers, leading to thoughts that there was some business concluded that did not make it on last week’s USDA Export Sales Report.
Offer lists appeared a bit more populated. Asking prices started last week unchanged from the week prior.
In addition, one of the most noticeable changes on offer lists were reports that the shipping timeframes of several selections offered by various packers were much earlier than they were two or three weeks ago, only supporting opinions by many pundits that many of the packers simply do not possess the sold-forward positions that they have been advertising.
As we moved towards the end of the week, we had multiple reports on Friday that the number of bids improved; however, sources also added that price ideas continued to run well below the asking prices of sellers. With most packers willing to trade roughly a dollar lower than their last traded levels, it appears as if there was a modest number of sales concluded.
Elsewhere, reports from the cowhide trade claim producers took a similar approach last week to that of their big packer counterparts, opting to delay publishing their offer lists until Wednesday, in spite of widespread speculation that there are a number of producers with more than their fair share of hides for sale, especially HBC.
As to offer lists seen last week, sources report to no surprise that many of the offer lists appeared as if they were well populated, with most producers offering a full complement of selections.
However, it is worth noting that offers of HNDC were not nearly as prevalent, as it appears there has been adequate interest in this selection that has several producers in decent sold-forward positions.
Producers of HBC have more than ample inventories of unsold material and this is leading to a number of unconfirmed rumours of product trading as cheaply as $14 delivered for a mixture of northern and southern HBC, while we have reports from producers that they were passing bids last week on northern material as low as $12.50 delivered.
An initiative to remove the 9% export tax on Brazilian wet blue hides is also weighing heavily on the cow market, while another problem is that there are a number of producers in Europe and Australia who appear as if they too have more than ample unsold supplies of cowhides.
We look for harvest levels to return to levels we were seeing prior to the holiday-shortened week, especially with packers registering margins in the neighborhood of $250 per head and higher. We would not be shocked if we saw a number around the 640,000-650,000 head range.
Meanwhile, opinions are mixed as to whether or not producers were able to clear their production last week. We remain of the opinion that most producers have more than ample supplies of unsold hides and with demand still appearing as if it is struggling to equal the harvest, the chances of producers improving upon their last traded levels is highly unlikely. If prices are to move, there is a much better chance we will see them move lower before they move higher.
We need demand and as of this writing, combined sales including last week’s USDA Export Sales Report is averaging 530,500. Harvest levels this year are averaging 618,600 head and with the US domestic soak pegged in generously at 35,000 hides each week there simply is not enough demand to absorb all of the hides being produced in the US.
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