US Perspective—30.01.18
30/01/2018
www.themaxfieldreport.com
Expectations at the start of last week were that packers would likely opt to leave offers unchanged, while there was widespread speculation by the trade that offer lists would likely be a bit more populated. However, packers shocked the trade at the start of the week by removing offers of regular weight HTS and BRS from their lists, while opting to leave unchanged asking prices on all other selections.
The lack of offers of HTS and BRS initially caused a bit of confusion in the trade as the expectation of most pundits was that packers had more hides for sale than they were willing to admit, especially if we are to use the latest weekly reports from the USDA. As a result, the majority of sources we spoke with last week reported interest as lacklustre, with numerous members of the trade sharing the opinion they enjoyed more interest from perspective buyers the week prior than last week.
That said, basis the Export Sales Report we saw this past Friday (delayed a day by Winter Storm Jaxon), it is likely this Thursday will confirm another week of sales well below the expectation of the trade.
In the meantime, packers collectively last week continued their efforts to convey a firm tone to the market, countering all bids at full asking prices.
In the meantime, buyers continue to resist any efforts by packers to push prices; however, we are not aware of any success for buyers in convincing packers to accept lower trading levels, regardless of the situation or ability to ship.
Last week ended with the market remaining at an impasse, while it also appeared as if the hides that changed hands continued to trade within the last reported trading range. However, as to the number of hides sold last week, many pundits are looking for a disappointing sales number on this Thursday’s USDA Export Report.
In the cowhide trade, most producers entered last week with sold-forward positions that were not nearly as strong as only a few weeks ago. These opinions were confirmed on Tuesday as offer lists were a bit more populated than the week prior, while some producers opted to lower their price ideas by roughly $1 versus the week prior.
Overall, members of the trade report interest was slow to develop and interest from tanners in the northern part of China was reported as disappointing; sources report many tanners continue to deal with either pollution issues, lower-than-expected leather orders or a combination of both.
In addition, ‘cheap’ offers of Brazilian wet blue or crust are also occupying the interest of tanners. In addition, there are reliable reports claiming that a number of smaller tanners have already closed their doors for the Lunar New Year Holiday (officially February 16), as opposed to trying to push through miserable business conditions.
As to sales last week, popular opinion of the trade was that producers were a bit more willing to negotiate prices as opposed to their big packer brethren. This resulted in some instances of trading at levels roughly $1 or slightly more down from last week. Meanwhile, the consensus of the trade is that it is unlikely there was a week’s worth of product sold last week.
We remain of the opinion that we will see harvest levels return to levels of 30,000 head or more higher than a year ago. This, coupled with thoughts that a sizeable number of producers possess weaker sold-forward positions than they did at the start of December, suggests that the upside potential of this market is unlikely.
Conventional wisdom would tell us that if there are tanners who have any interest in purchasing hides prior to their departure for the Chinese New Year holiday, this will likely take place this week or next. We look for most tanners to be in their office only a limited amount of time during the week of February 12.
Combined sales of wet-salted and wet blue hides have been falling well short of harvest levels. This is supporting the argument that there are some producers sitting on more unsold hides than they are ready or willing to admit. If we are to see any change in prices in the next couple of weeks, it appears a downward correction is much more likely that prices moving higher.
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