US Perspective - 20.10.15
Courtesy of The Maxfield Report
www.themaxfieldreport.com
The consensus of members of the big packer trade was that last week was yet another relatively quiet week of trading. Overall, there was no shortage of opportunity for packers to sell, as there were a modest number of tanners willing to consider volume.
Unfortunately, for packers, the vast majority of these tanners had ideas deemed much too aggressive and it is plausible that there was more business passed than concluded last week.
Those able to piece together business admitted it was not easy selling hides, while sources also confirm that to conclude business they had to be willing to consider lower prices. Overall, most sources called prices down $2-$3 on most selections, while declines on Jumbo and Super-Jumbo steer hides exceeded this. It is unlikely that producers were able to liquidate their production last week and if these assumptions are correct, it will mark the ninth consecutive week we have seen this occur.
Heading into this week, the sentiment is that most packers will likely have a full complement of offers, while there will be more-than-ample quantities of hides offered. In fact, some are leaning towards opinion that some sellers have certain selections available for prompt shipment and if this is correct, it is likely to weigh on sellers’ efforts to hold other selections steady with their last traded levels.
Reports from the cowhide trade claim the brief momentum many sellers saw a couple of weeks ago that allowed them to obtain sales $2-$3 higher appeared to fade as the week progressed. Producers who started last week with asking prices steady to slightly higher appeared as if they recognised mid-week that their efforts might be in vain and by the end of the week, prices were barely steady
There continues to be rumours regarding HNDC and producers’ inability to acquire timely Letter of Credit openings. Sources claim more-than-ample offerings of Brazilian wet-blue and crust were making it extremely difficult to sell plump cows last week.
As to expectations for this week, pundits are leaning towards the opinion sellers may have a tough week ahead. Overall, there are questions as to the sold-ahead position of some of the producers and it will be interesting to see how things play out.
THE LOOK AHEAD
As to our thoughts for this week, we remain of the opinion that we are in a “buyers’ market” and believe those with cash and the ability to take prompt delivery of product will likely be able to negotiate prices. In the meantime, with the market facing a fair amount of headwind, coupled with slaughter levels running at their highest levels of the year, it is likely to remain a situation for sellers where their first sale will be their best sale for the interim.
In the meantime, there is still plenty of negative news surrounding leather orders coming out of Asia, which certainly needs to be sorted out. Sources insist that the majority of leather orders have been placed for the fourth quarter and first quarter of next year and those looking for a miraculous round of business should not hold their breath.
Elsewhere, we are aware of tanners who confirm that current trading levels appear attractive and are able to operate profitably. In addition, it is well known that hides this time of the year tend to have the best grades of the year, so it is easy to make an argument for tanners who have a penchant for gambling to be closely monitoring the market.
That is why we remain of the opinion, given the lack of activity the past couple of months and perceptions that there are a number of sellers looking to sell, we will likely have a large round of business concluded in the next two to three weeks.
