US Perspective—26.05.09
26/05/2009
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
As we headed into the Memorial Day weekend, most everyone was feeling a little better about the market. Many hides have been sold and prices are stronger. From the tanner’s perspective, prices are at historic lows and are still reasonable. Both sellers and buyers are hoping for strength in the economy but realise a recovery will be a long, slow process.
With this in mind, there remains a level of resistance to much higher prices in the market. There is a barrier beyond $39-$40 and although there have been a few sales at this level, they are few and far between. Most business has been done at around $36-$37 or below.
Slaughter is estimated to be 678,000 for the week, up 6,000 from last week. The same week last year slaughter was 721,000, 6% over this past week’s.
There was an exceptional volume of trades reported on Friday with continued upward pressure on prices. Most notable were BS lightweights sold as high as $31 and HNH at $26.
The week proved to be as interesting as most expected in the hide market. Reports continued to show strength in the market with several of the steer selections rising by $2-$5, having a levelling affect on the Jacobsen Price Guide. Butts and Natives are now much closer to Texas steers with most ranging from $28 to $32. This falls in line with reports from China indicating resistance to anything with a 4 in front and interest around $37 delivered to an Asian port.
As reported last week, year-to-date exports are in a slightly favourable position somewhere around 100,000 ahead of year-to-date slaughter taking into account a small domestic consumption of hides.
Of the two statistics, most agree that the export numbers are a more reliable indicator of what is happening with the market. Since exports are required government reports and they are very simple—a hide is either shipped or it is not shipped, the chances for discrepancy are minimal. This isn’t the case for sales reports which must be constantly adjusted to reflect cancellations, re-sales, redirected hide and blue shipments, and so on.
Forward thinking
Adding to the complexity of hide and blue sales, suppliers have recently indicated they are taking an aggressive approach to covering future productions by selling ahead at levels they will not be able to cover if everyone takes delivery. Others have indicated that some sales are covering far forward positions, well beyond the summer. So the bottom line is sales numbers are a piece of the puzzle—an indicator of the general mood of the market—but they are difficult to interpret and not as reliable as the exports. This is especially true in a market that is volatile and so far underpriced from its historic trading ranges.
Good quality raw material is in limited supply worldwide and it appears that, for now, the market is recognising a higher value for US summer steer and heifer production. With no appreciable increase in the leather business and the peak season for shoes coming to an end, many are sceptical that a higher level of pricing can be sustainable—let alone can continue its momentum of increases.
Several suppliers noted they were having difficulty moving cows. One recently raised prices but has not had any takers.
A letter from John Reddington, president of the US Hides Skins and Leather Association has informed members that the US Department of Agriculture is warning that Mexico has been giving differing signals about bison hides. It appears that requirements are changing and it is likely that bison hides will not be allowed.
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