US Perspective – 25.2.14
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Popular opinion of the trade is that interest on big packer hides improved last week. According to various sources, the sentiment of the trade is that both packers and traders saw some decent interest / bids from tanners and the consensus is that the interest appeared very broad based.
Overall, it appears packers met their fair share of resistance to conclude business at more money last week, while for the most part it appears the lion’s share of hides exchanging hands did so at no worse than steady levels. Trading levels obtained in sales on HNS ranging from $108-$109, while sales of BBS reflected levels of $107-$108. Meanwhile, sales on HTS checked in mostly at $105 with a couple of isolated reports as high as $106, while sales on BS reflect $104.
As to how many hides exchanged hands last week, the trade does not agree, as we have spoken with some members of the trade insisting packers sold their slaughter, while others are insisting that although it was busier than the week prior and likely, we will see a better USDA export report, it is unlikely packers sold their slaughter.
As it pertains to the cowhide trade, it does not appear as if there was as much interest / activity as the big packer trade. We heard from a number of sources who confirmed that they did not see many bids last week, as it appears buyers are suffering from “stick-shock” as producers continue with the mind set to keep their prices firm.
Regarding sales last week, it still appears as if there is interest on HNDC and this allowed sellers to duplicate previous levels of $91, while interest on HNC and HBC was not as robust with sources sharing that sellers were able to conclude a few pieces of isolated business at levels unchanged with the week prior. Meanwhile, the number of cows in the slaughter mix remains unseasonably low with only 114,000 head slaughtered last week and year-to-date, the slaughter is down a little more than 100,000 head or nearly 10%.
THE LOOK AHEAD
As to what we expect for this coming week, we look for those willing to offer hides to keep prices no worse than steady and those who are particularly bullish, we would not be very surprised if they did not consider raising their asking prices this week.
In the meantime, we continue to be surprised at the discipline of tanners as amid speculation that many are short hides, we are not aware of any activity from buyers that would support any panic buying.
The problem as we see it is that prices of both big packer and cowhides are running roughly $12-$14 higher than a year ago (depending on the selection). Meanwhile, it is no secret that most tanners are struggling to operate profitably as leather prices although slightly higher, have not keep up with the increase we have seen in hide prices.
What will be interesting as we move forward, is considering we are in the last week of February, we are realistically about two-and-a-half weeks away from some members of the US trade departing for Asia in order to travel prior to the APLF.
Meanwhile, it is worth mentioning that historically, US hide prices have the tendency to soften towards the second half of the first quarter. However, considering the unseasonably low slaughter levels, it is difficult to imagine history repeating itself this year.
