US perspective--01.12.09
Courtesy of www.thejacobsen.com
Market activity and analysis
The Jacobsen was closed November 26-27 for Thanksgiving. As a result, the report covers Monday to Wednesday trading for last week.
The market was very quiet on Monday. Trading was light (three trades), but that’s typical for a Monday. Trades on Tuesday were mixed with a few reports rolling back in prices and a couple up. An HTS high was reported at $64 and HNS at $53.50. Most people were saying that the market was quiet.
Trading activity on Wednesday was moderate with quite a few people out of the office extending their Thanksgiving holiday observance. Although prices overall were up slightly, most were within the previous week’s levels. One exception was a new high for heavy native steers reported at $65.50.
During the first three days of the week, the Jacobson Price Index (JPI) climbed $1.20 from last week. It has climbed approximately $9 from $49 on October 26 to $58.25 on November 24. Wednesday’s trading changed the index to $58.93, up $0.68 for the day.
Across the span of steer selections, prices have climbed around $10 over the past four weeks—each week steadily increasing $2-$3. Several selections, notably HTS and HNS at $63 to $64, are breaching the threshold of $70 C&F into Asia. This is a huge hurdle, yet many in the trade remain bullish in spite of strong resistance from buyers. Although buyers continue to say that prices are too high to make ends meet, enough are paying up prices to keep moving the market. Several suppliers note that buyers are pushing hard and bids at $65 are prominent.
The latest data released by the National Agricultural Statistical Service on livestock slaughter through October this year—to no surprise—show this year’s kills behind last year, slightly over 4.18% with 10 months total slaughter at 28,707,000. The distribution of kill between selections as covered in previous Jacobsen commentary has shifted mostly due to the targeted cow herd retirement of the CWT (Cooperatives Working Together). During the year, cow kills as a percentage of the year’s total have increased slightly, or 0.5%, from last year, while steer/heifers dropped that amount. Within the cow selection, however, a more dramatic shift in kills occurred.
Demand for dairy cows rises
This year dairy slaughter is up from 7.5% to 8.6% of last year’s total slaughter, up 221,000 pieces. Conversely, other cows’ share of total kills is down 0.5% from a year ago, off 284,000. This year, the quantity of dairy cow hides is over 10% greater than last year while virtually all other bovine hide selections are down. In the meantime, of all cow selections, dairy cows are in greatest demand. While there are many factors that determine the market value of hides, including supply/demand and quality, in this case forces other than supply are dictating the strong market for dairy cows.
One possibility for the interest in dairy cows is that tanners who normally may not have used them have come to find they work well for some of their needs. Coming from that side of the industry, I can say that many tanners do not like to change. They do not like to mess with something that works. They have learned that sometimes, even a small change without thorough testing can be disastrous. However, when forced they can be very adaptive and that may be the case here.
With the hide market and economy as volatile as it has been this last year, tanners may have been forced, due to pricing or availability, to use dairy cows to fill their needs. There is no doubt that dairy cows have good grading and yield and with only 8.6% of the US slaughter available, it is conceivable that once tried, a couple of hundred thousand more have found a welcome home.
