US Perspective – 12.03.19
12/03/2019
www.themaxfieldreport.com
We saw a mixed bag of offers in the big packer trade last week. Packers who had people travelling in Asia refrained from making their offers public, preferring to let those who were travelling offer direct to their customer base. These offers were for the most part unchanged compared to the previous week. The only noticeable change was that some selections could be shipped earlier than advertised. Packers who did not have people travelling also had unchanged offer lists. This caught the trade by surprise, as we expected more selections to be offered and an increase in load counts.
Interest in the first half of last week was mixed. Most members of the trade reported they had a modest number of bids, while a few shared that they saw more bids in the first half of last week than they have seen in the past couple of years. Packers started the week with intentions of trying to hold prices at steady levels. Counters at these levels resulted in around half of interested buyers withdrawing their bids. They stated they would prefer to greet the various travellers before committing to paying the asking prices of packers.
As a result, some packers reportedly booked business at the last reported levels, although at limited volumes. We know of some sellers who booked at steady levels in the middle of the week, willing to trade prices down by as much as a dollar in order to conclude business.
It is always a difficult task to assess how many hides have changed hands with so many people travelling. Some of them likely concluded business when visiting customers and they likely had to negotiate on prices in order to move any significant volume.
In other news, it appears the number of HNS in the product mix is not nearly as prevalent as a few weeks ago. There has been some decent interest for this selection from tanners in Mexico and, to a lesser degree, China. Due to this, some buyers have been supplementing their purchases with BBS. Interest for branded steer selections such as HTS/BRS/CBS appeared to wane a bit last week as shoe tanners continue to complain about a lack of orders. This has led to thoughts that buyers could negotiate prices on these selections.
We are going to forecast that sales last week were likely larger than the previous week, although we are not ready to say there was a week’s worth of production sold. We will call trading levels weak to steady, as we suspect there was some trading in the second half of last week at slightly lower levels.
As with the big packer trade, producers in the cowhide trade with personnel travelling in Asia refrained from offering to the public, preferring to allow those who are travelling to manage this. Producers with no one travelling came out with offers that were the same as the previous few weeks.
A handful of sellers shared that they saw a decent number of bids from tanners from several different countries. These few were the exception, however, with most not seeing any substantial improvement in the number of bids last week.
Overall, producers were committed to holding prices as close to steady to their last reported trading levels as possible. Buyers bidding at lower prices found sellers unwilling to negotiate prices. Producers may enjoy stronger sold forward positions than their big packer brethren.
The number of hides changing hands last week was likely not much higher than in the past few weeks. This is difficult to call due to the number of people travelling and the chances of face-to-face business being concluded quietly. It does appear that buyers looking for HNDC had to pay at least steady levels to a dollar higher. There were some incremental advances on HNC. Prices on HBC appear unchanged. It should be noted that the number of cows in the harvest mix is not showing any signs of easing. Last week was the largest harvest of the year.
The look ahead
APLF in Hong Kong is upon us and it appears producers are limping into the fair. Few, if any, of the producers around the globe enter this week is possession of strong forward positions. This is especially the case considering last week’s USDA Export Report which claimed outstanding sales of wet salted hides stand at only 2.4 million hides. Sales of both wet salted and wet blue hides have been disappointing since the middle of January.
Looking ahead to this week, we will be interested to hear the reports from those who travelled prior to the fair. We also look forward to visiting tanners in order to hear their version of what took place last week.
In the meantime, harvest levels for both fed-cattle and cows do not look like they will ease in the coming weeks, especially given the news that packers were able to hold live cattle prices steady. They also pushed box beef prices higher, further improving their margins and giving them more hides to sell.
Of course, the question on everyone’s mind is what we can expect for leather demand moving forward. The hope is that by the time the trade returns from this week’s show they will have a much better idea of what to expect. For now, our opinion of the market remains unchanged.
We are still looking at the 800,000 more hides produced than we have sold this year (this does not account for the inventory we brought forward from last year). We are not aware of any segment of the trade which claims to be enjoying better leather demand than a year ago. Harvest numbers are forecast to be up by 1-1.5% this year and this is why we continue to believe that your first sale is likely your best sale for now.
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