US Perspective – 30.07.19
30/07/2019
www.themaxfieldreport.com
The big packer trade entered last week in no hurry to release its weekly offer lists. Once packers got around to publishing their lists, the majority did not have many selections offered. Sources reported that asking prices were no worse than steady, although some packers raised their prices by a dollar compared to the previous week. The most noticeable change in offerings was that many selections were offered for shipment in the second half of September or in October.
As to interest last week, the consensus of the trade is there were not many bids to consider. However, it is worth noting that we did not see many bids in the previous week either, but then the USDA Export Sales Report said over 700,000 hides had been sold. This leads to several questions about the accuracy and timing of the sales reported. Keeping this in mind, some pundits have jokingly commented that they would not be surprised if we saw an even larger sales number this week (editor’s sarcastic humour).
Overall, the sentiment of the trade is that although packers claimed to have traded at slightly higher levels last week, it is widely believed that not many hides were trading at these higher levels. There are some pundits who believe that we saw more business passed last week than booked.
Early reports from Asia claim that some traders were busier last week with some of the larger tanners in South Korea. One large tanner was believed to have concluded another decent round of business, while other large tanners known to have a desire for heavier weight steer hides appeared to have more appetite last week, but struggled to find enough offer.
Elsewhere, reports from the cowhide trade say offers last week were largely unchanged with previous weeks. The majority of producers continued to have more than ample offers of hides. We are also hearing reports that one large producer was touting some decent sales in the past two weeks, which resulted in them publishing a minimal offer list.
We are not aware of any cowhide producers who claimed to see a large number of bids last week. Based on the conversations we have had we would say the number of bids did not reflect much of an improvement compared to the previous week. The one positive for producers is that they had some modest interest on HBC/HNC early in the week, albeit at levels deemed unworkable. After these bids were rejected, buyers improved their offers by a dollar, making the interest closer to the price ideas of producers.
With regards to the number of hides changing hands last week, the sentiment of the trade is that it was not a busy week of trading for most. The good news for those selling hides is that sales took place at relatively steady levels.
The look ahead
We have started out on a new week of trading and our opinion is that packers appeared to be a bit more confident about the market. They have sold forward positions that may be their strongest of the year, although considering the market in the past two and a half year years, the bar is not set that high.
It appears cowhide producers are still struggling to find their way, leading us to suspect that the two-tiered market we have seen in recent weeks is likely to continue this week.
Meanwhile, we are still attempting to decipher how leather business will be for tanners in the second half of 2019. The initial perception of most members of the trade is that there have not been any fundamental changes in business.
That being said, considering the interest we have seen from tanners over the course of June and July, which has allowed packers to raise prices from the lows of the year to the current levels, it is plausible that there has been some improvement in leather orders. The problem is that tanners are not required to share how their business is, just as those selling hides are not required to report their sales.
In addition, we are now dealing with summer holidays in Europe. If we are to believe reports from across the globe, there are still a good number of unsold hides in Europe, Brazil and, to a lesser degree, Australia, to mention a few. This is why it is difficult to get our head around thoughts that there is decent upside potential in this market. Out crystal ball is a bit cloudy at the time of writing.
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