US Perspective—15.09.09
15/09/2009
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
Hats off to the pundits who predicted last week’s hide sales to be around 300,000—you were very close. The net US export whole cattle hide sales for week ending September 3 were 291,600. There was a small number (23,060) of cancellations, split fairly evenly between Taiwan, Hong Kong, China, and Korea at 5,482; 4,547; 4,420; and 3,589 respectively. No significant adjustments or cancellations for wet blue grains and whole hides were reported.
Most poignant in the USDA report were the very poor sales and shipment numbers. Combined hides and wet blue sales were 368,400, which is 286,000 less than the week’s kill. Shipments also fell behind with hides and blue numbers totalling 446,900, which is 208,000 under slaughter. This verifies that very little business was conducted during the ACLE exhibition in Shanghai in the first week of September, as was the general consensus from those in attendance, and perhaps sheds some light on the market’s retraction.
Trading today was mixed again with steady, as well as new highs and lows reported. Steers tended to drop while some cow selections fared better. The week’s Jacobsen Price Index was $48.69, falling around a dollar from last week.
Slaughter for the week was 562,000, down 93,000 from the same period last year due to the Labor Day holiday on Monday.
It is ironic that the US hide market is experiencing softness when virtually every change on our International Price Guide is showing price increases. One possible explanation for this is that the recent price correction in US hides has brought them in line with their counterparts in the international marketplace. On the other hand, it could also be a simple correction for an overplayed rally leading up to last week’s ACLE in Shanghai. As one seasoned trader put it, “They don’t all run at the same time.” This is no exception. So the hide trade continues to sort out the markets following what appears to be a minor correction in Shanghai. With the cow market holding its own, steers are under pressure and there is no consensus on where the market is—or if it will fall further. Tanners are expecting to buy down this week while suppliers are hoping to hold prices. With many tanners intent on sitting back to wait for prices to come down, they are reluctant to buy except at bargain-basement prices.
This week the divisiveness of ideas on pricing for steers is significant. On HTS, for instance, one source thinks the market will trade between $50 and $53, while another calls it at $55. Several reports of sales in Asia ranged between $51 and $53, converted to FOB from C&F. And at the extreme end, stories of traders reselling hides that were purchased at the bottom of the market, converted back on an FOB basis are as low as $48 to $50.
The feedback from most people returning from the ACLE exhibition in Shanghai suggests that the numbers will not be spectacular. The lack of reported sales was obvious and could mean there was little business to report, but with the logistics of many people travelling these sales might show up later. Compared to the APLF event in Hong Kong last spring, most called the exhibition a “success” from a point of traffic, the mood of attendees, and number of exhibitors. There is mixed response from traders when it comes to the topic of hide sales with many noting buyers were not cooperative and both sales volume and prices down.
On the positive side, some traders were keen to express an interest in higher quality material and think the rollback in pricing was a modest correction that was overdue in the marketplace; they are looking forward to good business. One source verified seeing a lot of tanners and traders with big inventories of hides purchased at the bottom of the market placing them back up for resale. HTS, for example, were sold from $55 to $58 C&F, down from the market value but very much higher than their purchase prices.
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