US Perspective - 15.10.19
15/10/2019
www.themaxfieldreport.com
Last week got off to a slow start. It appears that interest picked up in the second half of the week, supported by claims by a number of sources that they saw a modest number of bids, especially for better-quality US big packer hides. The majority of leather orders placed for the fourth quarter of 2019 is requiring tanners to sources either US big packer hides or equivalent selections from Europe and as a result, the prices of these hides appear to have stabilised.
What we find intriguing are a continuation of complaints from tanners insisting leather orders are not equal to levels of a year ago. However, when adding the most recent USDA Export Report to numbers from the first three quarters of the year, we see that sales are averaging 27,000 hides per week higher than last year.
Producers appeared to leave asking prices for cow hides unchanged, hoping to trade as close to steady levels as possible. The sentiment of the trade is that producers recognise that in order to move any substantial volumes they are going to have to be willing to negotiate prices. However, the challenge facing producers on their lower-grade selections is that current trading levels are barely hovering above break-even, leading to thoughts that producers might find it beneficial to render hides instead.
We hear interest from upholstery tanners has been weak over the past few weeks, while the lion’s share of interest appears to be coming from side leather tanners. Overall, last week was not a particularly busy week of trading; trading levels are steady to incrementally lower, depending on the selection, as well as the producer. We may have finally found the bottom of market on cows.
In the meantime, the big news is a report that the US and China appear to have reached agreement on the first phase of a trade deal that will delay tariff hikes that were scheduled to take place on some items as early as this week. According to various news sources, the trade deal will be written over the course of the next three weeks. As a result, the major indices hit their session highs on the comment, with the Dow Jones Index up over 500 points at one time during trading on Friday. This is good news for the hide market, which was facing a December 15 deadline on tariffs increasing, thus forcing producers to try to ship all of their outstanding orders to avoid the increase in costs.
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