US Perspective—04.03.14
04/03/2014
www.themaxfieldreport.com
Members of the big packer trade last week reported mixed results. We spoke with some members of the trade who appeared rather pleased with their business last week, while there were other members who were a bit disappointed. As far as volumes sold, we tend to believe that this week’s USDA Export Report is likely to fall short of last week’s report, while we are encountering mixed opinions as to whether or not packers were able to sell their production last week.
The interesting thing in the big packer market is the penchant among tanners for steer hides produced in the northern part of the United States. Historically, this area is known for cold temperatures and hides that are loaded with manure due to snow and freezing temperatures. However, due to the poor grading of HTS, tanners have started to favour northern steer selections and last week we saw prices of BBS and HNS move roughly a dollar higher, further widening the premium they hold over HTS hides.
As far as trading levels last week, we saw sales on BBS as high as $117-$118 delivered; however, sources claim that the $118 sale included 90-day financing for the tanner. Meanwhile, offers of HNS remain very tight and those few with offers were able to command prices as high as $118 delivered last week, leading to thoughts if any are offered this week, sellers may try to see if they can reach $120 delivered. In the meantime, sources share that the majority of HTS sold last week traded at $112 delivered with a few isolated sales in limited volumes at $113 delivered. As it pertains to BS, we understand the majority of sales took place at $111 delivered, while a few pockets of business on limited volumes were available at $112 delivered. Also worth noting is that we understand one of the packers producing wet blue has increased the number of hides they are putting into their wet blue production. Sources claim the increase in close to 10,000 hides per week and this will certainly reduce the number of wet salted hides offered on a weekly basis and, coupled with reduced slaughter volumes, is likely to cause some angst for those tanners who only buy wet salted hides.
Forecasts are predicting that slaughter levels for the month of March are likely to average only 565,000 head. Considering the current sold-forward positions of most packers and the fact that most will be departing for Asia in a couple of weeks to visit tanners prior to the APLF exhibition in Hong Kong, we tend to believe it is likely we could see fewer hides offered over the next couple of weeks. We assume that packers would want to ensure they have hides to offer the customers they will be visiting. In the meantime, considering hides are currently trading at all-time record levels, many tanners have yet to achieve any appreciable increases from leather buyers and many are bitterly complaining that they are suffering huge financial losses.
We remain intrigued by the numbers of people who have travelled Asia the past two or three weeks. It seems unusual considering that they have intentions to return to Asia for APLF at the end of March. Some speculate that many were visiting customers to ensure they were opening letters of credit on time, while we continue to hear an increasing number of stories of tanners who are late opening theirs. In addition, considering slaughter levels over the course of the past couple of months and our experience as a big packer, we remain of the opinion that it appears at least on the surface that there are too many hides being offered each week. However, as some members of the trade have pointed out, at current trading levels, perhaps sellers are being proactive in anticipating they may encounter customers unable to open their letters of credit on time and are likely selling some of the same hides twice to protect themselves. At the end of the day, we look for price increase to be difficult to obtain and it will be even more difficult for tanners to convince sellers to accept less money. We remain of the opinion that either leather prices are going to have to improve drastically in order to support current trading levels or hide prices will need to ease; the current situation is not healthy for anyone.
Share this story:
