US Perspective - 16.04.19
16/04/2019
www.themaxfieldreport.com
Packers in the big packer market entered last week with offer lists that were fairly well populated. They also appeared to have a full complement of selections on offer, with many of these available to ship in the second half of April. Many packers had more than ample offers of heifer selections for sale, a result of a substantial increase in the number of heifers in the weekly harvest mix.
Sources report that some packers opted to leave asking prices unchanged, while others lowered them by $1-$2, depending on the selection. Even with this reduction, asking prices were still higher than some of the trading levels booked the previous week.
With regards to interest last week, the majority of people we spoke with reported no improvement in the number of bids. In fact, most of the trade reported fewer bids than the previous week. Many of the bids seen last week were only for small quantities as there are simply too many producers from around the globe pushing them to buy. This is fuelling the rumours that producers are offering to their preferred customers at levels well below their official asking prices.
The price ideas of most buyers were several dollars under the asking prices of producers. Although sellers were willing to negotiate prices last week, the number of hides changing hands likely fell well short of the harvest, which was the largest of the year. Trading levels were easily $1-$2 lower than the levels of the previous week.
In other news, many in the trade are complaining about a lack of interest from tanners, even prior to last month’s APLF. Interest since the fair has not shown any noticeable improvement either. That being said, we have heard the following reasons for the lack of interest:
• Leather business in the first quarter of 2019 did not measure up to the levels of a year ago, especially automotive leather. In addition, several tanners are reporting that orders for the second quarter show no substantial improvement and are on course to fall short of last year’s levels;
• Several sources are reporting that a number of tanners have more than ample inventories of wet-salted and wet blue hides. This, coupled with leather orders falling below expectations, means tanners are not interested in adding to their inventories, unless the price is extremely cheap;
• Over the past two to three weeks, big packers have been much more aggressive in their pursuit of sales. This is raising concerns that we could see further reductions in prices in the coming weeks, especially when harvest levels start to rise;
Drop split prices in China have eased over the course of the past few weeks. It appears they will remain under pressure, which is moving the price ideas of tanners lower in order to compensate;
• Leather buyers are looking for substantial concessions on new business (up to 10%) as they are well aware of the decline in hide prices we have seen in the first quarter.
Elsewhere, reports from the cowhide trade claim the majority of producers entered last week in possession of offer lists that reflected no shortage of offers. Most had a full complement of selections. At the start of the week, most producers opted to leave asking prices unchanged, if for no other reason than because they thought they were cheap enough.
With regards to interest, things got off to a sluggish start. Buyers continue to be inundated with producers from the US and from other places around the globe. These producers are looking for high volume business and are attempting to lure buyers from the sidelines with offering prices that are well below their official asking prices.
By the middle of the week we saw some buyers willing to share their price ideas, although they were well below the price ideas of most buyers. That being said, after some tense negotiations there were sales concluded at levels $1-$2 lower than the previous week. We are not aware of any pundit who believes a week’s worth of production was sold.
The look ahead
As to what our expectations are for this week, we suspect the offer lists from producers around the globe will be fairly well populated. There continues to be speculation that many producers have substantial inventories of unsold hides. We look for the US harvest to follow its usual trend and move even higher following the Easter holiday at the end of this week.
We suspect that asking prices can/will be all over the board as sellers have been attempting to manage the decline in prices. They have been refusing, at least publicly, to consider substantially lower prices. However, considering the number of producers who appear to be well out of position, we suspect we will see some sizeable price declines as producers compete over the limited number of buyers who are willing to share their price ideas.
Unfortunately for those selling cowhides, some lower grade selections are approaching price levels close to the break-even for producers. This is leading to thoughts that producers are close to telling their small suppliers that they will not be able to pay them for their hides. In the case of lower grade material, they may actually request that the supplier pays them to pick up the hides.
At the end of the day, as well as the hides for sale in the US (both big packer hides and cowhides) there are also a number of hides for sale around the globe. Until we have a situation where supply and demand are brought closer to balance, it is likely that your first sale will be your best sale.
Share this story:
