US Perspective - 5.4.16
05/04/2016
www.themaxfieldreport.com
Reports from members of the big packer trade claim that last week was not a particularly busy week of trading for packers, especially those who were looking to conclude business at levels steady with their last traded levels. Overall, several sources shared that they saw a fair amount of interest from buyers at a couple of dollars under their last reported levels; however, as a group, it appears packers refused to chase the lower ideas of buyers.
In the meantime, popular opinion of the trade is there were not many hides exchanging hands last week, and, if correct, would mark the second consecutive week that we have seen dismal sales by packers.
The few hides that exchanged hands did so at no worse than steady levels, although there was certainly a handful of rumours insisting that some of the sellers were “considering” bids at lower levels.
Meanwhile, when speaking with members of the trade who attended the APLF in Hong Kong, it appears as if those travelling prior to the fair were disappointed with their sales trip, as the vast majority of sellers appeared to have no interest in chasing hides, especially at steady trading levels.
Some of those who travelled said some tanners had a number of drums that were not turning, which only confirmed that business for many tanners is not equal to levels of a year ago.
Some claimed number of tanners had inventories of raw stock that were lower than levels of a year ago. Of course, this is a subjective observation; however, it is plausible that if a tanner did not have as large of order book as last year, they would likely reduce the amount of their raw stock.
Meanwhile, as we were closed on Friday in order to travel home, we have a handful of sales to report, led by reports of BBS selling at $72.50. We also have numerous reports of sales on HTS, with sales on regular weight HTS ranging from $65 to $66.50 to as high as $67, while the only other sale is a trade on Super-Jumbo HTS reflecting levels of $78.50.
As it pertains to cowhides, reports from members of the trade appear similar to those in the big packer trade. According to sources, producers who travelled prior to the show found buyers uninterested in purchasing hides at steady levels, while it appeared that there were opportunity to sell hides if producers were willing to consider levels a couple of dollars under their last traded levels.
Overall, sales last week were sporadic at best, as it appears producers were reluctant to follow the lower ideas of buyers, leaving popular opinion of the trade that producer likely did not clear their production last week. In the meantime, there were a number of rumours swirling through the trade accusing some of the producers of trading hides at $2.50-$3 under their last reported trading levels; however, we were unable to confirm these rumours.
In regards to sales, we were able to round up a handful of sales led by reports of processors still able to obtain as much as $62 for HTS, while we also have a sale on HND at $55, while we understand there were many opportunities to sell at even lower levels.
Meanwhile, the only other trading is a couple of sales on HBC, as we have product in the North at $33, while sales in the South check in at $31.
As to our initial thoughts for this week, we tend to believe that packers may be painting themselves into a corner, as their reluctance to concede to lower trading levels, while insisting that they continue to possess strong sold-forward positions, may come back to haunt them as we move through April. We believe that there has been a fair amount of “smoke and mirrors” utilised since tanners returned from Chinese New Year and this, coupled with trader speculation, resulted in a modest 10% increase in prices, without the benefit of a change in overall leather business.
If big packer prices are a bit “top-heavy”, and we continue to see slaughter levels exceed levels of a year ago, although not by substantial amounts, it will not be good news for sellers. That said, we tend to believe that the stage is set for a possible correction in prices, especially keeping in mind as we move through April that the busy season for tanners will soon end.
The hope for producers is that the various leather fairs the past couple of months have resulted in an increased interest in leather. However, we remain of the opinion that the core of the problem is the fact that demand from China remains well below levels of a year ago as the Chinese economy continues to struggle and, until we see an improvement, it is difficult to follow the bullish side of the argument.
Share this story:
