US Perspective—07.05.19
07/05/2019
www.themaxfieldreport.com
The majority of sources claim the Labor Day Holiday in the middle of last week took a huge toll on business. Many believe served as an excuse for tanners for not buying while the leather business remains poor. Many agents of the packers remain aggressive in attempting to secure bids and this is leading to rumours circulating through the market of some packers selling HTS at levels of $30 C&F, and of one of the packers selling as low as $28.50 C&F to settle a pending claim. There are claims that trading levels of CBS and BRS has fallen under $30 C&F, while there are claims that sales have been concluded on BBS at levels under $40 C&F.
Reports from China claim the Labor Day Holiday is being observed by most tanners and with leather business so slow, most tanners departed on Tuesday afternoon and most only worked on Monday and Tuesday last week. It is clear that producers have plenty of hides for sale and all hides offered are reported for prompt shipment.
There are numerous reports from members of the trade who are surprised by how aggressive some of the big packer have become in the past couple of weeks. In fact, we are aware of negotiations traders were having with tanners and close to booking business at lower levels, only to find out packers were willing to book at even lower levels.
Elsewhere, reports form the cowhide trade reflect little, if any change. Sources report offer lists of producers last week were more populated. In addition, there were numerous reports all week accusing many producers of being more anxious for sales, while also indicating they are willing to negotiate prices, especially for hides that can ship promptly.
As to interest last week, sources report they did not see any improvement in the number of bids.
It was another week of trading in which sales are likely to have fallen six-digits lower than the harvest, leading to questions among members of the trade as to how long we can continue to see this take place. There are simply too many cattle standing and with packers registering lucrative margins, in spite of poor drop credit values (hides are at their lowest levels in nearly 30 years).
Looking ahead to next week, we do not expect to see many changes. There are a number of tanners who are back to playing their usual games, either looking to file market claims, delay shipments and letters of credit, requesting to renegotiate outstanding orders and, worse yet, cancelling contracts. All of this is creating huge headaches for those selling hides.
Meanwhile, we expect harvest levels to increase further and with demand continuing to fall short of the harvest, it is likely prices will continue to grind lower. The problem is some selections of hides are reaching levels that are resulting in them having no value and it will be interesting to see what happens once they cross this line and have a negative value.
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