US Perspective - 02.12.14
02/12/2014
www.themaxfieldreport.com
As expected, interest in big packer hides was lacklustre last week and this, coupled with the holiday for Thanksgiving on Thursday, resulted in the vast majority of business being concluded by the middle of the week.
The number of buyers willing to submit ideas was noticeably lower than the week before, while price ideas from buyers were running roughly $2-$3 under the asking prices of packers.
According to reports from various sources, several of the packers appeared willing to counter some of these ideas from buyers and popular opinion of the trade is that there was a modest number of sales concluded at a dollar under levels of a week ago.
We are hearing numerous unconfirmed rumours of packers who concluded some direct business at levels that would be multiple dollars under the last reported prices and usually when this type of trading occurs, the buyers are instructed that they are to keep these sales to themselves.
Overall, even though we saw a slaughter under 500,000 head last week, we have our reservations as to whether or not producers were able to sell a week’s worth of production. As far as trading levels are concerned, we can attest to sales on HNS at levels of $111 FOB, while BBS sold at levels of $109 and rumblings of possibly lower levels. HTS sold in volume at $105 FOB, while there were isolated claims of sales as high as $107 by packers. Also worth noting, trading levels on BS for the most part reflected levels of $102 FOB, with rumours of lower sales at $100 and even lower, while some of the packers were still insisting that they could sell as high as $105.
As it pertains to the cowhide trade, overall, sources share that interest reflected the same as interest on big packer hides with sources citing there were not as many buyers willing to share ideas this week and those who had lower ideas. We are told that HNDC traded for the most part at $77-$78 FOB, while sales on HNC reflected levels of $68-$69 FOB. Sources report that selling HBC remains a challenge, while trading levels on material in the north was at $57-$58 and in the south at $55-$56.
There is talk by some members of the trade that cowhide prices may have bottomed in the last few days and we will have to see how this plays out, especially with reports that the weekly number of cows in the slaughter mix is expected to fall below 100,000 head on a weekly basis following the New Year.
We are of the opinion that we are still in a situation where supply is exceeding demand and this is likely to continue putting pressure on prices. Leather demand, although not equal to levels of a year ago, is still relevant and this, in our opinion, is why some savvy buyers will be looking for buying opportunities as we move through the remainder of the year.
With the Christmas and New Year’s Holidays just weeks away, we will certainly see a lot fewer hides in the next 30 days and this, coupled with rumblings from packers that they are likely to reduce their weekly slaughter intentions further, may result in a lot fewer hides for sale in the next four or five weeks.
That said, the Chinese New Year holiday in February is likely to have some influence on the market as well. Producers will be unable to ship anything to Asia from the middle of January until the early part of February and until we see an improvement in demand for hides, this leads us to believe we remain in a demand-driven market.
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