US Perspective - 7.4.15
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week saw packers start the week with thoughts that they would try to hold prices steady. However, these thoughts quickly gave way to lower prices once it was discovered that several of the packers were already selling hides direct to tanners prior to the APLF at levels below their last reported trading levels with instructions to the buyer to keep those sales quiet. In the meantime, reports claim traders have been very aggressive the last week to 10 days and willing to accept orders under the lowest prices of packers.
Overall, we are leaning towards the opinion that a decent number of hides have exchanged hands. What will be interesting is to see how sales are reported to the USDA, as we tend to expect travel by members of the trade may result in some sales reported later than the week they were traded.
As to price levels last week, HTS sold in volume at $100 delivered, while we have heard reports of trading at $98-$99 the last couple of days. Meanwhile, trading levels of BBS reflecting levels of $107-$109 delivered, while BS trading at levels of $100-$104 delivered depending on origin and weight and CBS at $99 delivered. Meanwhile, limited number of HNS in the harvest mix is keeping this price firm with trading at $110-$111 delivered.
We did have a couple of sales reported from business pending over the weekend as we have sales on regular HTS checking in at $92, while sales of BBS reflect levels of $101.
Reports from members of the cowhide trade claim the majority of sellers started last week with offers that appeared in line with the week prior. Popular opinion is that producers did not enjoy a busy week of trading as most were insisting on steady levels, although many shared that if producers were willing to consider levels $1-$2 lower, they could have sold many hides.
Overall, trading levels on cowhides is perceived to have taken place at steady levels; however, we continue to hear rumblings that some producers may have accepted lower levels quietly under the table. Surface trading is indicating HNDC sold last week in a range of $78.50-$80 depending on quality, while sales of HNC hovered around the $70 mark, while HBC exchanged hands at $67.
Worth mentioning, there are rumblings that there is a fair amount of unsold Brazilian wet blue being offered and sources report many sellers appear aggressive and hungry for business. If this is true, this could spell for trouble for those attempting to sell plump cows over the course of the next few weeks.
In regards to trading, we have a couple of sales to share as we have reports of sales of HTS by processors reflecting levels of $90, while sales of HNDC reflect levels of $78.50.
THE LOOK AHEAD
As to what we expect for this week, it is worth mentioning that several, Asian countries will be observing Memorial Day at the start of this week and many tanners will be out of the office until the middle of the week. In the meantime, it will certainly be interesting to gauge the offer lists of packers this week, especially on the heels of all begrudgingly accepting prices several dollars under their asking prices and it will be interesting to see how they price their hides this week.
In the meantime, the industry is still attempting to decipher information gathered at last week’s APLF. However, based on the poor attendance and confirmation by those who travelled and tanners that leather business is obviously not as strong as levels of a year ago, it is difficult to find members of the trade who are not a bit pessimistic about business moving forward.
The good news for those selling hides is that harvest levels are not likely to change anytime in the near future. This is due to margins in the packinghouse continuing to run deep into the red and with reports that packers paid all-time record prices for cattle last week ($170 / cwt.); it is very likely that we could challenge the lowest number on record – 518,000 head.
In the meantime, considering the how much many producers have discounted hides in order to create sales, we tend to suspect most will be reluctant to accept further discounts this week.
On the one hand, we heard of a number of tanners who were coming to the APLF looking to buy hides at levels $1-$2 under asking prices who were “ambushed” by various sellers around the globe the first day of the show. Sources report many of these tanners “reined in” these buying aspirations, opting to wait a few days. If correct, we could see some modest interest from these tanners this week, not to mention thoughts by some that larger tanners who have inventories of raw stock at prices much higher than last reported trading levels are interested in seeing prices stabilised.
