US Perspective—21.04.09
The Jacobsen Commentary and Market Opinion—21.04.09
Courtesy of www.thejacobsen.com
Market activity
There was downward pressure on the hide market this week as prices of most selections dropped while sellers struggled to hold a bottom on trading. The challenge to keep product moving has placed the emphasis of many suppliers to shipment and payment, followed by price. The pressure was also exacerbated by slow finished leather business in Asia and tanners’ ability to hold off for the best prices possible. This said, there are occasional cases where specific supply sources have been able to get a premium for either exceptional quality or a great relationship with a specific customer.
As of Thursday, HNS ranged between $25 and $28, down a couple dollars. Butts and HTS were $24.25 and $26.25, off $1 or $2. Other steer selections followed suit and heifers fell nearly $2 on average to $20.50 and $15 for natives and brands. Cows were not spared and dropped $1-$2 depending on selection with exception of SBC, which were already at an extremely low price.
Slaughter for the week was estimated at 606,000, up 6,000 from the previous week but down 71,000 (nearly 10.5%) from the same period last year. Year-to-date slaughter of 9,388,000 is down 568,000 (5.7%) from the same period last year’s slaughter of 9,956,000.
A fair amount of trades were reported on April 16 with some at steady prices but most ranged up or down from April 15’s sheet with steers on the up side and cows down. Notably, HNS had a couple of sales up $2.50 and $3 at $28 and $28.50. There was one HNS sale reported at April 15’s price of $25.50. One heavy Texas steer sale reported up $2.50 at $27.50, which was offset with a $25.50 trade to average $26.50.
Several suppliers have indicated that branded bulls are difficult to move and one sale was reported on April 16 at $9.50, down a dollar. Several cow selections were also off around a dollar.
The pressure is on
The hide market was under pressure on April 15 with most selections reported down from the Jacobsen Price Guide on April 14. Heavy native steers were down $2 to $2.50 at $25 and $25.50. Butts were down $2 on average for lights and heavies at $24 and $24.50, respectively; and HTS were down $1 at $25. Branded steers were off $2.50 on average reported at $21 for lights and $20 for the heavier weights. One NBC was reported up $2.50 at $8.
April 14 was another quiet day with not a lot of activity reported. There were trades on HNS, HTS, and BBS down from the previous day’s trading but a BS trade reported up $2 from April 13. The equity markets slipped on April 14 after news of weaker-than-expected retail sales. This would lead one to believe that the lower numbers will work their way back up the production chain and decrease orders from manufacturers.
There was a fair amount of trades reported on April 13 and prices were off slightly on a few selections. Butt branded steers (64/66) were down 50¢ at $25.50, BS (66 Min) were off $3 at $23 and CBS were off $2 at $18. Northern heavy native cows and N HNDC were also reported down with natives at $13 and dairies at $17, off $5 and $2.50, respectively.
US cattle on feed down 5%
Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totalled 11.2 million head on April 1, 2009. The inventory was 5% below April 1, 2008. The inventory included 6.98 million steers and steer calves, down 5% from the previous year. This group accounted for 63% of the total inventory. Heifers and heifer calves accounted for 4.12 million head, down 4% from 2008.
Placements in feedlots during March totalled 1.80 million, 4% above 2008. Net placements were 1.75 million head. During March, placements of cattle and calves weighing less than 600 pounds were 300,000; 600-699 pounds were 340,000; 700-799 pounds were 592,000; and 800 pounds and greater were 570,000.
Marketings of fed cattle during March totalled 1.83 million, 1% below 2008. Other disappearance totalled 50,000 during March, 21% below 2008. This is the lowest other disappearance for the month of March since the series began in 1996.
Economic news
News on the economy continued to be mixed with The Federal Reserve saying that there are reasons to be optimistic about the economy after its survey of business conditions nationwide struck a slightly more upbeat tone than last month.
While March housing construction dropped 10.8% to the second lowest level on record for that month suggesting that the worst housing slump in decades is not over, the National Homebuilders Association said on April 15 its gauge of builder sentiment rose five points to 14—its highest reading since last October. And according to the US Labor Department, the number of people filing for first-time unemployment fell by 53,000 people to 610,000 last week, much better than economists predicted.
The USDA export sales for week ending April 9 was positive with combined hides and wet blue sales at 678,400 comparing favourably to that week’s slaughter last year of 600,000 by 13% or 78,400 pieces. China was the largest destination of sales for both hides and wet blue with 45.6% hides and 47% of wet blue.
Exports for hides and wet blue combined were 760,000 and 160,000 pieces or 28% more than the same week’s slaughter last year. The primary destination for both hides and wet blue was China with nearly 58% of hides and 44% of blue destined for that country.
Year-to-date analysis of hide production, sales, and exports show a very close balance through week ending April 9. Slaughter for the period was 9,086,000 while sales and exports of hides and blue were 9,373,000 and 8,914,000 respectively. If you take a modest domestic production of finished leather for the period of 20,000 hides per week, combined exports and domestic production is 9,214,000 pieces or 128,000 pieces, 1.4% greater than slaughter.
Using these USDA numbers, you could safely say that, so far in 2009, exports and domestic production are keeping up with slaughter. If the most recent trend of exports exceeding slaughter continues, then the carryover from the end of 2008 will begin to decline, which will be a good thing considering that the barbecue season is fast approaching.
Activity in China
Business was quiet in the China market with sources commenting that there has not been any volume business reported.
Tanners are making inquires in the market but many are not making firm bids. In general, most tanners’ priorities lay with leather orders and not hide prices. One remarked that last year, when the market was $70 for HTS, he was pushing for shipments and now at $30 he has no desire to buy because he has no leather orders. Business is becoming extremely slow in the domestic leather market and many people think it will remain this way during the traditional slow season all the way through June.
At these cheap prices for hides, tanners can make money; but unless they have confirmed orders in hand, they are concerned they will build up inventories and tie up their cash. At the heart of the problem is the lack of confidence many have in future leather business.
One supplier indicated that business can be done at lower prices—in the range of $30 for HTS delivered into China. Branded steers are expected to drop this week with many tanners reported to have enough hides in inventory for expected leather orders. There is interest in HNC and HNDC with one supplier reporting bids of $25 for HNDC.
