US Perspective—13.01.09
19/01/2009
The Jacobsen Commentary and Market Opinion—13.01.09
Courtesy of www.thejacobsen.com
As we begin 2009, it seems there will finally be some stability to the hide market. Or at least we all hope that’s the case. Generally, the bottoming out of the market from the prices of just a few short weeks ago is a welcome respite from the disasters that hide producers and traders have recently had to deal with.
The problem now is where do we go from here? It certainly seems that bulls have regained some control of the market since the major packers withdrew from offering. The fact that packers had lots of hides to sell the week before makes everyone think that hundreds of thousands of hides were traded and that packers no longer needed to sell. Neither one is really the case. We think packers are playing it ‘close to the vest’ and that, although they may have sold a lot of hides in the recent past, the numbers were not as huge as some believe. Packers and processors still have inventories of some selections that need to be sold—and more importantly, to ship.
The more likely answer requires some study of the past, particularly the previous February-to-March periods. Normally, the hide and leather markets take a break during the Christmas and New Year holidays. We traditionally do not see the activity until just after the Chinese Lunar New Year holidays in late January or early February. Leather business usually takes off in that February-to-March period, and many suppliers of hides are currently hedging their bets anticipating that an improvement in the leather business will occur again. We are not so sure that it will be the same this year.
We do not see how anyone can become bullish on any markets considering what has happened to the economies both here in the US and abroad. We read the statistics in the paper and see them on the TV every day. Business is terrible. Car companies are all losing billions and some are closing plants left and right. Even Toyota is idling plants in Japan for at least two months. Shoe business is down. We have no way of knowing how much, but we do know that most of the hides we produce do end up in shoes or car seats. With sales of those items tanked, it is really hard to make a bullish prediction for leather, at least for the next six months. Therefore, the packers and processors should continue to sell hides when the opportunities are there because we are not out of the woods yet.
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