US PERSPECTIVE—11.02.20
Courtesy of The Maxfield Report www.themaxfieldreport.com
Packers entered this week with offer lists that were slightly more populated than the week prior and opted to leave prices unchanged, continuing to lay claims of possessing strong sold-forward positions.
As to interest last week, the majority of people we spoke with in the big packer trade reported only a limited number of bids last week, with the coronavirus to blame. Worth noting, buyers outside China appear as if they are looking to take advantage of the lack of activity and are bidding prices sharply lower. That said, packers last week were trying to make the best of the situation and insisted that they could still trade at steady levels, while the overall sentiment of the trade is not only were sales extremely poor last week, it is widely speculated that some sales had taken place “behind the scenes” at levels as much as $2 under the last reported trading levels.
Meanwhile, according to various sources in Asia, there were announcements by the Chinese government that many cities where the outbreak appears under control would be able to “re-open” this week. We are aware of a handful of tanners who resumed operations; however, with the virus still spreading in some parts of China at an alarming rate, many workers opted to stay home yet another week. There are rumblings that we may not see business fully reopen until the week of March 2.
In other news, there are numerous reports of container yards that are full or close-to-full with containers that are loaded and destined for China. However, shipping companies are refusing to load these containers onto vessels and this is starting to result in the problem not only of congestion, but also a lack of empty containers and we suspect this problem will only worsen before we see it improve.
Elsewhere, reports from the cowhide trade claim the offer lists of several producers were also slightly more populated this week on the heels of sales over the past two or three weeks that have been fairly uneventful. In terms of asking prices, most suppliers started with prices unchanged from the previous couple of weeks.
Last week, the majority of producers experienced a general lack of interest, similar to what their big packer brethren were seeing. However, we understand a couple of processors started laying the framework the week prior that they were willing to listen to reasonable bids and this, they claimed, resulted in a decent number of bids from tanners outside of China.
It is still too early to make a determination on the impact of the Coronavirus on the market. However, this much is clear: the economic impact is starting to grow and the expectation of the trade is that it will likely be severe and reach across many segments of the global trade. For now, there is plenty of uncertainty facing numerous markets.
Elsewhere, we are leaning towards thoughts that we will start to see a seasonal slowdown in harvest numbers (not unusual for February), which will be good news for those attempting to sell hides. Meanwhile, we certainly expect offer lists to be more populated this week, while we also look for buyers outside of China to be looking to buy hides at substantially cheaper levels.
