US Perspective - 7.7.15
07/07/2015
www.themaxfieldreport.com
Downward pressure continued last week in both the big packer and cowhide markets, exacerbated by the non-performance of tanners. As a result, those selling hides (packers, processors and traders) continue to “step over each other” to identify perspective customers who have money and are willing to open letters of credit and ship product, while these customers recognise they are a premium and are aggressively bidding prices lower.
The non-performance of tanners is leading to confusion, rumours and misinformation in the market. As a result, there is a wide range of prices being reported and some of these stories have dollar values that are sometimes dollars per hide different.
Meanwhile, reports continue about tanners blatantly asking for huge concessions on prices on outstanding contracts to justify opening tardy letters of credit, with other tanners notifying sellers they will need to delay shipments, and some submitting what many believe to be “market claims”. In the meantime, there are reports that traders are making short sales with and suggestions traders will not cover the sale with the packer until they have letters of credit open in order to minimise problems for themselves.
As to trading levels from last week, we hear that the best sales on HTS were at levels of $74-$75 delivered, while sales on BS were at $74-$77 delivered, depending on weight average and origin. Sales on BBS drifted closer to $80 delivered, while sales of HNS were a couple of dollars higher. Meanwhile, prices of Jumbo and Super-Jumbo steers continue to drift, with these selections losing another $3-$4.
Elsewhere, trading levels on cowhides on minimal volumes reflected levels of low to mid $60s on HNDC, while sales on HNC were difficult to come by at levels of $55 delivered, and there were rumours of sales into Italy in large volumes closer to $50 delivered. Meanwhile, sales of HBC were also a bit thin last week with material in the north at $51-$52 delivered and southern material at $48-$49 delivered.
Overall, popular opinion is that a combination of the holiday and overall reluctance of buyers to consider volume means it is unlikely producers liquidated their production last week.
THE LOOK AHEAD
As to our thoughts as to what we expect this week, we tend to agree with popular opinion that last week for the most part was a “lost” week of trading for most in the US due to the holiday at the end of the week. Overall, we believe that producers failed to liquidate their production and we look for numerous selections to be on offer lists again this week with sellers looking to sell quantities of almost all selections.
In the meantime, working in the favour of producers is that July slaughter should be in line with June, which was the smallest June on record. The challenge as we see it is for sellers to continue identifying customers willing to take timely delivery of product, as those selling hides have more than their fair share of customers guilty of non-performance.
The other bright spot for those selling hides is that historically, August is when we start to see movement by tanners looking to secure product for upcoming winter orders. In addition, we are only six to seven weeks away from members of the trade traveling Asia prior to the All China Leather Exhibition (ACLE) and we suspect there could be some positions taken by traders over the course of the next several weeks. At the end of the day, it appears that sellers will continue to have their work cut out and we remain of the opinion that your first sale is likely to be your best sale for the next few weeks.
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