US Perspective - 18.3.14
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Reports from various members of the big packer trade claim trading started out rather lacklustre last week; however, by the time Thursday rolled around, numerous sources reported receiving their fair share of interest from buyers. In fact, we understand that some of the packers had seen so many bids that they withdrew their offers for the week, while buyers hoping that they might be able to negotiate with packers to soften their ideas were obviously disappointed.
As far as trading levels are concerned, HTS traded in decent volumes at $105-$106, or $112-$113 delivered, while sales on BS hides were roughly a dollar back of these levels. In the meantime, it appears as if a two-tiered market has developed for big packer hides in the northern part of the US as packers view their grain quality better than those hides in the south. Demand for HNS and BBS appears as if it remains relentless, while we are hearing that buyers unable to secure these selections are now pursuing CBS.
This strong demand has allowed packers to take advantage and raise prices on these selections with prices on HNS reported as high as $112 or $119-$120 delivered, while BBS were sold at $111 or $118-$119 delivered. Even sales of CBS are moving higher as we had sales at $105 or $112 delivered reported at the end of last week.
In regards to volumes sold, we are encountering mixed opinions, as we initially were of the opinion that last week’s sales were in line with the week prior. However, considering that many sources are laying claims to strong sales late in the week, we are going to believe that many of these will not be reflected on this week’s report and look for a number this Thursday morning in line with last week.
The one thing to keep in mind is that beef demand is improving with the weather and is receiving more attention than many pundits had expected. This is due to pork prices that are “going through the roof” - a direct result of the escalating problem of pig virus PEDv. Independent sources claim this has resulted in the death of 5 million piglets dating back to the end of last summer and forcing many pig packers to reduce their slaughter intentions as we move forward.
Members of the cowhide trade have similar reports as members of the big packer trade. Many claim business was a bit lacklustre through the majority of the week; however, towards the end of the week several members of the trade report a noticeably increase in bids. This was deemed a pleasant surprise by producers who were hearing some very gloomy reports about a number of upholstery tanners in China being forced by the government to shut down their beam houses due to new pollution regulations.
Meanwhile, there is no doubt that the cow slaughter that was 13% less than levels of a year ago and down slightly more than 10% for the year is allowing those selling cowhides to be selective. In addition, with production numbers so much lower than a year ago, the problems tanners are having in China complying with new pollution regulations have yet to take any adverse toll on the cow market and assisting sellers to hold prices steady.
THE LOOK AHEAD
As we go to press, we find it very interesting that we saw such an improvement in the number of people looking to buy hides at the end of last week, especially considering we were hearing reports of traders being accused of liquidating their long positions and agents for some of the packers pressing for bids last week.
When checking with some members of the trade today, they shared a variety of reason for the improvement in the number of people bidding on hides at the end of the week. Some attributed it to slower-than-expected shipments of Brazilian wet blue and crust, some pointed to tanners finally securing some necessary increase on new leather orders, while others simply state that tanners are making their final push for coverage as the approach the end of their busy season.
As to what we expect for this week, we look for offers to be limited with those producers who have representatives travelling. Meanwhile, with slaughter levels appearing as if they are slowly moving higher, sellers will need to monitor these numbers in order to prevent increased numbers to erode their sold-forward positions.
Keeping all of this in mind, we are two weeks away for the APLF in Hong Kong and we have a difficult time imaging we will see anything but a steady / firm market over the next couple of weeks, especially with the number of people who will be travelling prior to the start of the show. The hope is that once the trade comes together in Hong Kong we will have a much better idea of tanners’ inventory as a group, leather business and what we can expect moving forward.
