US Perspective—10.11.09
10/11/2009
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
This past week has been anything but dull in the US hide market.
Prices have slipped into high gear and as one tanner put it, “gone up in chunks”. The Jacobsen Price Index (JPI), a composite of steer and heifer prices, reflects this with a weekly average increase through Thursday of nearly $2 at $52.21—and illustrating how it is still climbing, Thursday’s JPI was up $1.50 from the week’s average.
While the JPI reflects the average prices from the Price Guide, high-end trades this week reflect more dramatically the market’s movement, illuminated by the steer selection breaching the $60 level for the first time since the market meltdown last fall. With Asian tanners barely over the sticker shock of C&F prices above $60, it is amazing that FOB sales this week have leapt ahead of C&F prices tanners had resisted such a short time ago.
Mixed signals
In the US economy, mixed signals are giving both signs of hope and despair. On the upside, October’s retail sales are up 2.1% compared with a drop of 4.2% last year. Productivity gains are also positive but bad for employment. Productivity rose at an annual rate of 9.5% in the third quarter following a 6.9% showing in the second quarter of this year. As the unit labour rate has fallen 5.2%, jobs have also gone. Unemployment for October has risen to double digit at 10.2%, the highest level since 1983.
Friday’s trades for the most part were within the week’s price ranges. One new high of BS was reported for $60—coincidentally, the same level as the week’s high HNS and HTS. Several suppliers noted they had withdrawn offers at week’s end on anything that hadn’t sold.
In the latest USDA Export Sales report for whole hides and wet blue, combined sales and wet blue were under the week’s slaughter of 651,000 by 37,500 pieces at 613,500. There are not any significant corrections or adjustments in either whole hides or wet blue. Gross hide sales were 4.2% over net sales with corrections amounting to a little less than 21,000 while wet blue adjustments were negligible.
Exports were not as close as sales to the week’s slaughter with combined wet blue and whole hide shipments totalling 491,800 pieces—falling behind kills by 159,200. The year-to-date combined shipments through Week 44 are 27,816,200, still slightly ahead of kills of 27,732,000.
Wet blue sales over the past four weeks averaged 140,200 per week, trending ahead of the same period’s shipments of 110,780 by approximately 26%. Last week’s wet blue sales were 83% full substance.
US tanneries producing more wet blue
Regular weight HTS are a scarcity, not being offered in force for the past one-and-a-half months, and many tanners are wondering where they went. A couple of months ago, a common concern from Asian tanners was that the quality of HTS was not as good as it used to be. That concern has shifted to a more basic problem—supply.
There are several reasons for the lack of regular weight HTS. Slaughter is off by more than 4% from a year ago and live weights are up this year compared to last with YTD average weight of 1,311 pounds. At the same time, more Jumbo Steers are being offered, and many packers have intentionally moved their positions in. Finally, more HTS from US hides are being converted to wet blue in the US.
Like all matters in the hide business, the only constant is change. The shortage of HTS will not be permanent and sooner or later these hides will return to the market.
Demand is real according to sources although no one can seem to put their fingers around exactly what is driving it. Most sales now are looking at December to January, and some February shipments.
On the automotive front, US auto sales are not expected to return to their grandeur for some time to come. According to Detroit-based R.L. Polk, an automotive data forecasting service, sales of US vehicles will not reach 15 million cars and trucks until 2013. In 2007, auto sales were 16 million and many analysts believe we are on track to buy 10 million in 2009. Auto sales are projected to rise nearly 20% to 11.8 million in 2010.
We here at The Jacobsen wish to convey our condolences to the family of Mearle Greek. Mearle, 58, passed away on Saturday, October 31 from cancer. Always a consummate professional, Mearle retired from Cargill in Schuyler, Nebraska, following 30 years as a hide man. He leaves his wife, Myrna; four children; four grandchildren; and one great-grandchild. Mearle will be missed by his friends in the trade.
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