US Perspective—12.01.10
12/01/2010
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
This past week the market, which began under pressure, particularly for steer hides, has held up remarkably well. Especially when you consider the small export sales reported (150,800 for hides and blue) by the US Department of Agriculture for week ending 31 December. Through Thursday, the week-to-date Jacobsen Price Index was $58.66, down $0.76 from last week’s average of $59.11.
There was a new high for packer northern heavy native dairy cows at $52, sure to cause a moment of pause with people following the dairy hide market. NHNDC usually have the largest spread of any Jacobsen selections as their value is noted to vary considerably depending on sources.
The market ended the week on a firm note with most selections up in the $1 range.
Slaughter this week is estimated to be 637,000, exceeding the same period last year of 609,000 by 28,000.
In the previous USDA export sales and shipment report for cattle hides and wet blue, you might see why some Asian tanners are sensing a little blood in the water.
Not that one indicator tells the whole story, but the previous week’s sales for combined whole hides and wet blue, 150,800, were very, very low. Although many people were not working due to the holidays, slaughter for this past week was nearly three-and-a-half times greater at 520,000. The week’s shipments were more in line with the week’s, kills with wet blue and whole hides, totalling 455,300.
Looking at the 2009 year-end review, shipments and slaughter were nearly the same. During the year shipment numbers were just under 32.5 million and slaughter nearly 32.4 million. Sales of combined hides and blue for the year fell short of slaughter by around 1.7 million, or approximately 5%.
If you consider that domestic production is in the range of 1.5 to 1.7 million hides, this would indicate that, from a sales point of view, sales and slaughter are at parity for the year. With export shipments falling even with kills last year, taking into account domestic consumption, you could probably say that inventory positions have decreased by 1.5 to 1.7 million.
While the US steer market is not as firm going into the New Year than it was in December, there appears to be a strong interest for European and Australian hides in Asia. One European source said they sold out of every selection they had through the end of January, all at their asking prices. Is it possible that there is a pent up demand that is being played down and could this translate into an up-tick in demand for US hides? Clouding the issue is feedback that Asian tanners look at US winter hides less favourably than summer hides. They are assuming grading will be worse which is playing a role in their determination of hide value.
On the subject of winter hides, it should also be noted that not all winter hides are equal and it’s not correct to paint them with the same brush. For instance, this year the weather patterns in the Central US are exceptionally cold. When the temperature drops and stays cold as it has so far this winter season, hide quality can be very good as sources are indicating is the case so far. Tanners have also learned that suppliers can implement processes to mitigate the negative effect of frozen mud and manure. In spite of adverse conditions these suppliers produce superior product.
Share this story:
