US Perspective - 8.12.15
Courtesy of The Maxfield Report
www.themaxfieldreport.com
Last week saw big packers limit their offers to only tanners, refraining from offering to traders. As expected, this had a substantial impact on interest, especially considering that the offers to tanners were limited in the number of selections offered, not to mention the fact that quantities were minimal as well.
In the meantime, packers also set their sights on obtaining more money for their hides and a combination of all of the above definitely took a toll on the number of hides exchanging hands. The good news for packers is that they were successful in obtaining higher prices. According to various sources, prices were up anywhere from $2-$3 depending on the selection.
Overall, packers were continuing to tout that they possess strong sold-forward positions, while forecasts are calling for harvest levels in the neighbourhood of 560,000s the next couple of weeks, which will be followed by two holiday-shortened weeks of trading. In the meantime, we are hearing rumblings that some of the packers experienced issues with hides weighing heavier than expectations, supported by reports of regular-weight steer contracts shipping at weight substantially higher than contract.
Meanwhile, members of the cowhide trade are also reporting a rather lacklustre week. Similar to big packers, the majority of producers decided only to offer direct to tanners, for the most part, by passing traders.
As far as offer lists were concerned, we understand sellers limited the number of selections they were willing to sell, while also limiting quantities. They also set their sights on obtaining more money. By the end of the week, popular opinion of the trade is the few hides that exchanged hands traded at levels roughly a dollar higher than the previous week, while sellers failed to sell a week’s worth of production.
Trading levels on HNDC are not clear. There were claims by some producers that they were able to sell limited quantities to a US tanners at $2-$3 higher than prices obtained overseas and we will have to see how this plays out this week.
THE LOOK AHEAD
As to our thoughts for this week, we look for those selling hides to follow the same pattern as last week. We would be surprised if producers did not only offer tanners again this week, while we also look for offers to be limited once again.
What will be interesting to see is to see if sellers will attempt to raise prices again. We tend to agree with other pundits that last week was not a particularly busy week of trading for sellers and it is unlikely they sold a week’s worth of production. That said, logically, one would think those selling hides would likely encounter a bit more resistance this week to higher prices.
Another situation worth keeping an eye on is shipments. This is the last full week to ship hides to Asia and we suspect producers are pushing to ship as much as possible before the end of the week. What will be interesting is to see how producers navigate the second half of the month as well as the first couple of weeks of January and if it will have any negative impact on the market.
