US Perspective - 10.10.17
10/10/2017
www.themaxfieldreport.com
Tanners who returned to the office the second half of last week expressed some interest in buying hides; they appeared as if they were finding some value at current trading levels.
Buyers with ideas of trying to push prices lower found packers unwilling to trade at lower levels, leading to thoughts that perhaps we have found a bottom to this market.
In other news, Lineapelle took place last week and initial reports claim the numbers of exhibitors and visitors was higher than the last edition, while several expressed positive thoughts about the fair in general. In addition, there were many US wet-blue producers in attendance, who were looking for sales, leading to reports of W/B HNS selling at $78-$80 C&F, while sales on BBS reflected levels of $75-$76 C&F and HTS at $70 C&F.
As far as sales for the week, most sources we spoke with are reporting a lacklustre week of trading attributed to the holiday, so it unlikely that packers cleared a week’s worth of production.
Sales were concluded at similar levels to the previous week, while packers were quick to dismiss bids lower than their last reported trading levels.
Reports from Asia claim there was only a limited amount of activity as the majority of Asian were observing Chinese holiday Golden Week. We did have reports of some tanners returning to work the second half of the week and this resulted in a limited number of bids.
Buyers continue to target lower prices; however, the number of “super-aggressive” bids ($3-$5 or more lower than asking prices) are not nearly as prevalent.
In addition, sources report that they were seeing interest from tanners that had been on the sidelines the past several weeks and this is being interpreted as an opportune time to buy.
In other news, reports surrounding pollution in China appear as if they have been overstated, likely fuelled by tanners to continue to keep pressure on the market. Efforts by the Chinese environmental team continue; however, widespread temporary closures of tanners are reportedly incorrect and exaggerated, with many saying this is more of an isolated problem as opposed to one that is widespread.
COWS
Reports from the cowhide trades are similar to those from the big packer trade, as the Golden Week holiday in Asia took its toll on interest.
A few tanners returned the second half of the week and those willing to share their price ideas continue to target lower trading levels, while interest as a whole paled in comparison the previous week.
Overall, it appears that producers put forth their best efforts to hold prices steady and we are not aware of any succumbing to lower prices.
However, there is speculation by some that there may be a couple of larger producers who are not as far sold forward as they are advertising and it will be interesting to see how this plays out next week.
With regards to sales, there were “dribs and drabs” of business concluded; however, it appears producers likely did not sell a week’s worth of their production.
Most hides exchanged hands at steady levels, and there are suspicions that some HBC might have sold at slightly lower levels, but we could not confirm this.
Sales of HNDC registered at $48, while the only other trading was a couple of sales on HBC, trading in the north at $30, while product was sold in the south at $27.
Our weekly TMR Cowhide Index comes in unchanged, checking in at $36.25, the lowest level of the year. Compared with a year ago, our index is down $3.50, or 8.8%, while for the year, we are down $5.00 or 12.1%.
THE LOOK AHEAD
From our vantage point, it appears as if the downward pressure on the market is easing. The market appears to be stabilising, which is a welcome change for those selling hides, as we have seen pressure in the marketplace since early March.
We were pleasantly surprised by the resiliency of producers, as in spite of the continuation of large harvest numbers and Asia tanners out of the market for the most part, they were able to hold the market steady. This is leading to thoughts that we are at the bottom end of the trading range and that the lows for the year have been registered.
That said, although some producers are ready for prices to move higher, this might not be as easy as some producers are thinking, especially with harvest number continuing to run well above levels of a year ago and there are still hides for sale in Europe and Brazil.
Looking to next week, it might be premature for sellers to raise their asking prices; however, there are many sellers “chomping at the bit”. If there is any sign of decent interest upon the return of tanners from their holidays, who could blame producers for trying for higher levels, especially keeping in mind that since March we have seen prices decline by a third.
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