Don Ohsman's view from America

We think that the current rally has just about run its course and it’s time for the market to have a rest. As noted, increasing resistance to steadily rising prices has been seen as we go to press. This causes us to think that regardless of solidly forward sold producers, tanners will resist even more in the coming week to what we think will be fully steady to higher asking prices.
Yes, as previously forecast, there was a great deal of need for replenishment and short covering by tanners and traders. However, when viewing export sales in May that have totalled 3,852,900 raw and wet-blue, we have to think that a good deal of any latent demand has been satisfied. Prices have risen more than 30% in the past month; a rarity indeed.
The market has to digest this and, we believe at this point, is not prepared to support c&f steer prices in excess of $40. This is not to say that it will not happen in the coming months but we do not see it within the next several weeks.
If our scenario is correct once again, it will mean that packers will have a week and then likely three where they will not sell their production and could then be susceptible to accepting lower bids. Will this come to pass? Only time will tell but we think it is a very real possibility.
It’s no secret that the industry incurred horrendous losses in the last months of 2008, bankrupting some and straining others almost to financial breaking point. This is due to a majority of tanners either totally ignoring higher priced sales contracts as the market fell 50%, or offering to re-negotiate on hides that went begging in many cases at foreign points.
Still bloodied by these losses, sellers have not forgotten their beating. Now that prices have risen 30%+ from their February/March lows, it seems that a majority will now go back to these same tanners who ‘played games’ before and will now ask for re-negotiations.
Hides that were sold at $30 c&f will now only be shipped if the tanner is willing to pay, for example, $10 more. Those tanners that previously met their commitments will be able to have their hides shipped to them regardless of the price contracted but not those who took advantage as the market crashed. It should be mentioned that these non-performing tanners were not immune to cancellations by their customers either. Footwear/upholstery manufacturers also received cancellations from importers and retailers and, therefore, felt justified to do the same with their tanner suppliers.
Is it moral? Ethical? No, but as one observer vehemently noted to us today: ‘you have to fight fire with fire and if they can treat us this way, we have to play by the same rules.’ A sad day for our industry where for generations, one’s word was his bond. Ramifications that could affect the current market could be felt but it is not clear as to how.