US Perspective—09.03.10
09/03/2010
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
The market this past week has been strong, as prices across the board moved upward. Prices varied but major steer selection like HNS, HTS, BBS and BS increased by at least $0.50 and in some instances more. The highs this week included natives, $69; Texas, $67.50; butts, $68; and brands, $67.50. Cow hide prices also increased with some selections ending up by two or more dollars.
There was a moderate number of sales reported on Friday. Heavy native heifers sold for $60, up a couple dollars from the previous Friday. Heavy native steers traded for $67 for lighter weights and $68 on heavier weights, both off the week’s highs. Butts reported at $66.50 for lights and $67.50 for heavies, both up from last week. The only cow selection on Friday was dairy cows, selling for $53.25 on average.
Slaughter this past week is estimated to be 617,000, down 15,000 from the same period last week and up 14,000 from the same period last year.
The most recent USDA export sales, for week ending February 22, 2010, are fairly similar to this year’s trends. For the week, combined wet blue and whole hide sales are 470,000 and shipments are 567,000 pieces. The same week’s slaughter was 632,000—surpassing sales by 162,000 and shipments by 65,000. Through week eight of this year, combined hide and blue sales average 517,325 and shipments, 552,000. Kills are averaging around 635,000, remarkably close to last week’s number.
Wet blue sales last week were 78,100, down considerably from the previous week’s 236,100. The sales number however was impacted by a reduction in unsplit wet blue for Taiwan of 26,424 pieces. On a yearly basis, wet blue sales are averaging approximately 126,000 hides. Blue shipments for the week were 104,000, trailing yearly average shipments of 133,825.
More and more suppliers are becoming concerned that if price levels climb much higher a correction will be imminent. When you take into account the magnitude of the price increases from their lows of less than a year ago and the difficulty tanners are having keeping leather prices up with hide prices, you can understand their anxiety.
Regardless of these seller’s concern that the hide market may become too high for its own good, don’t look for anyone to take less money than the market allows. We all know the way markets work—both sellers and buyers try to maximise their positions, and prices will not retract until buyers stop paying more.
Looking back to the beginning of 2010, slaughter numbers for the first eight weeks of this year are significantly higher than this time last year. This year kills are over 5 million head compared to 4.8 million for the same period last year—an increase of nearly 5%. On the other hand, shipments during the first seven weeks of this year are trailing last year by 2.5%. In 2009, wet blue and whole hide shipments were 3.95 million compared to 3.85 million this year.
Compared to slaughter, shipments for the first seven weeks of this year are behind by 595,000 pieces. Taking into account a domestic US production and consumption of 210,000 at 30,000 hides weekly, inventory overhang for the first seven weeks of 2010 should be around 385,000.
Buyers from areas including Thailand, Taiwan, and Korea have re-entered the marketplace.
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