US Perspective - 23.10.18
23/10/2018
www.themaxfieldreport.com
Reports from the big packer trade claim packers entered last week with offer lists that were unchanged from the previous week. Most packers appeared to have lists that were heavily populated with offers of Jumbo and Super-Jumbo hides. As to shipping times on offers, shipments on more popular selections were a bit further out, while shipping times on less popular selections and on heavier weight hides were fairly close in.
With regards to interest last week, the week started out very promising as several sources reported seeing a decent number of bids from tanners in various countries in Asia. However, the bids from Chinese tanners came with an insistence that if business was going to be concluded, the producers had to guarantee delivery of hides before January 1.
Packers appeared to be willing to try and negotiate prices with tanners last week. However, they were not comfortable making promises that containers would be delivered before January 1, as this is the responsibility of the steamship company. Packers were willing to guarantee an ex-plant date with tanners that would give the opportunity for the container to arrive on time. Unfortunately, this was not enough to appease the concerns of Chinese tanners and a substantial number of bids were withdrawn.
In addition, once non-Chinese tanners discovered that Chinese tanners had withdrawn their bids, it encouraged some of them to also withdraw their interest. A number of tanners believed the action by Chinese tanners would likely cause some additional pressure on the market in the last couple of months of the year.
As to sales last week, many pundits are of the opinion that a decent number of hides changed hands. This led to comments that this week’s USDA Export report will likely exceed last week’s report. We are not aware of any members of the trade who believe that sales exceeded the harvest last week.
Most members of the trade agree that trading levels on popular selections were in line with the previous week. Sales on less popular selections were $1-3 lower, depending on the selection and the packer.
Reports from the cowhide trade claim most producers entered last week in possession of offer lists that were exactly the same as in the previous couple of weeks, both in terms of the number of selections offered and the asking prices.
As to interest last week, it was similar to what packers saw. Tanners from several different countries were bidding at the start of the week, while Chinese tanners made very specific requests for product to arrive before January 1. Many producers again attempted to appease tanners by offering a latest ex-plant date, which was not well received by Chinese tanners who withdrew their interest.
Overall, we are hearing mixed reports about business last week. Some larger players are sharing that they saw one of their busiest weeks of sales for several months, with decent interest on HNDC. Others were not as fortunate, although for the most part they were able to trades at levels close to their last traded levels.
The look ahead
As to our thoughts for this week, there is a good chance we will see packers’ offer lists a bit more populated, especially on Jumbo & Super-Jumbo hides. Cooler fall weather, coupled with the cattle coming to slaughter appearing to be overfed, is resulting in a noticeable increase in production of heavier weight cattle hides. In the meantime, packers got a small reprieve with harvest numbers declining from 650,000 to 625,000 head. Those hoping that tanners are ‘sitting in the weeds’ waiting for their opportunity to buy are likely to be disappointed.
We will also be very interested to see if Chinese tanners continue their efforts to conclude new business with the insistence that it must arrive before the first of the year. Looking at the calendar, this means that tanners have roughly three weeks to buy hides. With the Thanksgiving and Christmas holidays, logic would indicate that these need to be loaded before the 15th of next month.
As to trading levels, we suspect packers will continue their efforts to hold prices as close to steady as possible. However, considering that we are not keeping pace with the harvest every week, we suspect there are more hides for sale than producers are willing to admit. Prices are likely to move lower before they get any higher.
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