US Perspective - 30.10.18
30/10/2018
www.themaxfieldreport.com
Last week in the big packer trade saw packers with offer lists that were unchanged compared to the previous week. Most packers had plenty of Jumbo and Super-Jumbo hides for sale, as well as regular weight HNS hides. Offers of regular weight steer hides were less plentiful for many packers, while offers of heifer hides were almost non-existent. With regards to asking prices, packers for the most part left them unchanged, likely encouraged by what was deemed a decent week of sales the previous week.
This, coupled with a fair amount of business that wasn’t quite concluded, supported thoughts that there would be another decent round of interest last week. The week got off to a surprisingly slow start, however, and it was never able to generate any real momentum. This led to opinions that substantially fewer hides were likely sold last week compared to the previous week.
With regards to trading levels, HNS are trading in a wide range. Most of the hides changing hands last week were sold at steady levels, while any attempt to achieve higher levels was met with considerable resistance. Offers from buyers to bid prices lower were dismissed by packers.
Elsewhere, reports from sources in Asia over the weekend claim a couple of major shoe brands are asking for price concessions of 12 RMB (Chinese Yuan) per square foot for new business. This translates into tanners needing to buy hides in the range of $35-40 delivered in order to break even. It is worth noting that there is speculation that a large tanner has been willing to accept this price, with basis purchases they have made in the last week to ten days reflecting such levels.
Several shoe tanners have shared that leather orders requiring better quality finished leather are showing signs of increasing. Orders for medium-quality finished leather have been nearly non-existent in the past few weeks, resulting in a build-up of this material in a number of tanneries.
In the meantime, business for automotive tanners was mixed, depending on the automaker. Sources report business for some remains decent, while other tanners associated with brands that have seen double-digit decreases report that their requirements have been reduced. They have also expressed concerns about further reductions in the first quarter of 2019. Meanwhile, furniture upholstery tanneries claim the tariff on furniture exports to the US is significantly impacting their business, and that orders have slowed considerably.
Last week int the cowhide trade saw offers from most producers not much different compared to the previous week. A number of producers were laying claims to having enjoyed a decent week the previous week and had slightly smaller offer lists as well as higher asking prices on a couple of selections.
With regards to interest, sources report that last week got off to a sluggish start and never recovered. There were not as many bids as pundits had been expecting, especially in light of the number of bids producers saw the previous week. The good news for those selling hides is that attempts from buyers to bid prices lower were refused by producers, while attempts by a couple of producers to achieve an increase in trading levels were met with considerable resistance.
Overall, popular opinion of the trade is that it is highly unlikely that producers liquidated their production last week. The number of cows in the harvest mix continues at unseasonably high levels.
The look ahead
As to some thoughts for this week, considering the lack of sales last week, we suspect we could see offer lists a bit more populated this week. There continue to be speculation that there are a number of producers who have unsold hides for sale. It will be interesting to see if producers continue to pass on opportunities to sell hides at lower levels.
Meanwhile, interest in the last couple of weeks from tanners has been a bit ‘Jekyll and Hyde’. Two weeks ago we saw interest from a number of countries, while last week several sources called the number of bids disappointing, with substantially fewer hides changing hands.
In the meantime, brands and retailers are preparing their stores for the upcoming holiday season. There are hopes that a strong economy will have customers loosening their purse strings. The question facing the footwear trade is if this will offer a boon for them as well. It is worth noting that analysts at the NPD Group appear to be optimistic. Reports claim that there was strong momentum for summer and fall styles in July and that this continued into August. Earlier than normal colder weather in September and October has resulted in decent sales of boots. This is giving positive early indications that the footwear trade will see a good fourth quarter.
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