US Perspective – 18.12.18
18/12/2018
www.themaxfieldreport.com
Members of the big packer trade claim last week started with little, if any, change to the offer lists of packers, with the majority still fairly populated. In terms of selections offered, sources share that roughly half were available for December shipment, with the rest listed for January shipment.
It is worth noting that one of the major packers who did not offer the previous week did not offer last week either. However, by the second half of last week we had unconfirmed reports of some “special” offers coming out of this camp.
Interest got off to a sluggish start at the start of last week, following a pattern we have seen for a while. Reports suggest interest did not improve much in the second half, which is different from previous weeks when sellers had seen an increase in the number of bids as the weeks progressed.
Most do not consider last week to be a busy week of trading. There were plenty of claims that packers were reaching out to some of their old friends to ask for first consideration should they have any passing interest in buying hides.
Packers made their best efforts to hold prices as close to their last traded levels as possible in the first half of the week. As the week progressed and sales were not concluded in a way that would allow packers to keep pace with a large harvest, we saw them a bit more willing to negotiate prices. This resulted in some business being concluded at levels $1-2 lower than the previous week.
As to how many hides changed hands last week, popular opinion of the trade is that packers will be hard-pressed to lay claim to having cleared their harvest. There were efforts by packers to trade behind the scenes late last week, which makes it extremely difficult to get an accurate read on the situation.
Reports from members of the cowhide trade claim there were not any real changes to the offer lists of producers last week. The majority appeared to be a carbon copy of the previous week. There was one exception, with one of the larger producers reportedly eliminating a few selections from their offer lists. They appeared to have reduced their asking prices by several dollars on the few selections they offered. This has been interpreted as an effort to bring asking prices for those selections closer to recent trading levels.
Overall, most producers opted to leave asking prices unchanged, with most of them believing that to agree to lower prices on some selections would mean it would make more sense to send the hide to landfill.
The number of bids was for the most part disappointing last week, with many sources reporting that there had been more the previous week. There was speculation that a good number of the sales reported on the most recent USDA Export Sales Report belonged to one of the processors that had been travelling in Asia a couple of weeks ago.
Some good news for those selling cowhides is that the number of cows in the harvest mix is showing signs of easing. This would be good news for weary sellers who are believed to possess more than ample supplies of unsold hides.
With regards to interest last week, it got off to a sluggish start and did not appear to have gained any real momentum as the week progressed. Most pundits are of the opinion that the number of hides changing hands last week likely fell well short of the number of hides produced.
Producers made their best effort to hold prices as close to steady levels as possible. Most believe prices are already way too low. Overall, we would call prices unchanged, although there were rumours of some producers trying to sell hides quietly. It is likely they were discussing prices lower than our price guide on this business.
The look ahead
This is the last full week of trading for 2018 as we will see most of the trade out of the office next Monday and Tuesday. Here are a few initial thoughts for this week:
1) Considering the last two weeks have been the two largest harvest weeks of the year, we were leaning towards thoughts that we would see another large number this week. However, Monday got off to a slow start, which has us questioning if we will see a number larger than 600,000 animals.
2) For all intents and purposes, last week was the last change to ship to Asia in order for produce to arrive before tanners start refusing shipments ahead of Chinese New Year (February 5). As a result, it is likely we will see some rather lacklustre shipment numbers this week, next week and the week after. It will be interesting to see how the producers that are believed to hold some large inventories handle the next 2-3 weeks.
3) As to interest the next couple of weeks, we assume that buyers willing to share their price ideas are looking to purchase material to arrive following the Chinese New Year celebrations. The offer lists of most producers clearly still have hides for shipment this month. This could result in some interesting conversations between buyers and sellers as buyers appear to have the upper hand.
4) Leather orders are showing no real signs of improving. In fact, many pundits would argue that the downturn we have seen in automotive sales in recent months guarantees that there will be a further reduction in leather orders.
2018 is winding down. Given how poor business has been for most the year, it is understandable that many people are anxious to turn the page on the calendar in the hope of better times in 2019. However, unless we see a sizeable improvement in leather demand in 2019, we believe that some difficult conversations are going to have to take place and that some hides may have to be removed from the equation in order to balance supply against demand.
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