US Perspective - 22.3.16
22/03/2016
www.themaxfieldreport.com
The consensus amongst members of the big packer trade is there were not nearly as many interested buyers last week compared with the last few weeks; however, in spite of the limited amount of interest, packers were successful in their efforts to obtain slightly higher prices for several different selections.
Overall, most pundits say quantities sales for the most part were rather limited, as the vast majority of buyers did not appear as if they were prepared to consider voluminous-type purchases, especially at current trading levels. As a result, this left most members of the opinion packers likely did not clear their slaughter.
As it pertains to trading levels, it appears buyers of BBS were the most active, resulting in trading levels of $73-$74 early in the week, and unconfirmed rumours of sales as high as $75 by week’s end.
Meanwhile, HNS traded at $74, while sales on HTS ranged from $66-$67 depending on origin and weight average. Other trading had BRS in a range of $63-$65 depending on origin, product mix and weight average, while sales on CBS reached as high as $61.
The number of heavier weight hides in the mix is on the decline. Although seasonal for this time of year, an earlier-than-usual warm-up across most of the US has cattle coming to slaughter not exhibiting longhair, mud and manure. As a result, heavier weight hides are much dearer, while those with offers are finding interested buyers willing to pay a premium, and the spread between regular weight and heavier weights is widening as a result.
In the cowhide trade, last week appeared to be a difficult week for producers. The number of interested buyers appears to be dwindling week by week. The combination of the ongoing problems in Wuji, China, coupled with reports of numerous producers pressing for sales, has most buyers reluctant to share their ideas, as they want to avoid overpaying for product.
In the meantime, we are hearing an increasing number of reports of problems with outstanding orders for tanners in Wuji, with continued requests to delay shipments, while other reports are claiming there are a number of resales taking place, and we have also heard of some cancellations.
As it pertains to trading levels, sources report that HNDC traded in a range of $56-$58 last week, depending on the origin, while trading levels on HNC ranged from $42-$43, and interest was minimal at best. Elsewhere, interest on HBC was also lacklustre, with sales at $33 in the north and $31 in the south.
THE LOOK AHEAD
As to our initial thoughts for this week, we fully expect the usual activity to take place a week before a major show. This means producers who have representatives traveling Asia will likely refrain from offering to the trade, allowing those travelling the extend offers to customers of their choice.
We fully expect packers to keep their offers no worse than steady with last week and considering the amount of interest they are seeing on BBS, it will be interesting to see if they will push for even higher prices.
Meanwhile, we are leaning towards thoughts that producers of cowhides may be a bit more willing sellers this week and although there might not be offers to the general public, we believe there will be more than a few producers traveling who might be willing to negotiate prices, especially with buyers willing to consider volume.
In the meantime, Chinese customs authorities have released figures that footwear manufacturers in the country brought in just over $8 billion in shoe exports in the first two months of 2016 and this figure represents a decline of 17.3% compared with the first two months of 2015.
The China Leather Industry Association said the fall in export values was a combination rising labour costs and sluggish demand in export markets, thus confirming reports we have been hearing for some time that leather demand for many shoe tanners is falling short of a year ago.
Overall, we suspect prices of big packers hides to remain firm this week, while we question if there is much more upside in prices as we contend much of the recent increase in prices was mainly attributed to trader speculation.
In the cowhide market, we remain of the opinion that producers are not enjoying the market as much as those selling big packer hides and likely we will see underlying pressure continue.
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