US perspective - 06.04.2010
The Jacobsen Commentary and Market Opinion – 06.04.10
Courtesy of www.thejacobsen.com
Market activity and analysis
The market was very quiet with no sales reported on Monday. A modest number of sales was reported on Tuesday, all steer hides. The market was firm with prices on several selections edging up. In particular, HTS sold for $68 to $71 and BS ranged from $64 to $70, both up a dollar. Butts and native steers traded within the previous week’s price range.
On Wednesday a small number of sales was reported at lower price points, but steady with the previous week’s low reports. Offsetting these were sales on native and branded bulls, up $5 and $3 respectively.
A large number of trades was reported on Thursday with prices remaining firm. Due to the seasonal weight change, several selections that were not reported on Thursday in their new weight range have been unquoted. There was no Jacobsen report on Good Friday.
The Hong Kong show
The resistance to higher prices was noted by a number of people travelling to APLF. One supplier commented: “The Korean demand for leather is good but high raw material prices do not allow a profit for tanners.”
Reports regarding the opening day of APLF (March 29) indicated the morning was slow but momentum picked up during late afternoon and evening. Sources conveyed that tanners needed to buy hides, wet blue and splits. The problem again appeared to be prices. For the moment there is resistance to paying current levels. One source said there were rumours a packer sold a huge number of containers, but there was no verification this business took place.
Information on market activity at APLF began to trickle in with a mixture of prices and volumes on March 30. Generally, suppliers noted the market was firm with prices holding or advancing slightly. One source indicated that the Taiwanese tanners, among others, have drawn a line in the sand on prices and did not expect many hides to change hands. On the other hand, reports have trickled in that some sales were done at prices significantly above the previous week’s trading ranges.
People started to head home from APLF on March 31, some with orders in hand and others yet to do business. From the perspective of one trader, the fair was “good, but a lot smaller than it used to be”. Still, there were a lot of people in attendance from Asia, Europe and the Americas. Traffic was particularly good on Tuesday morning but by 3pm the fair began to thin out.
A common observation from the show was that tanners were stunned by rising prices, which affected business volume. Several people in attendance noted price resistance, particularly from the Taiwanese tanners who cannot afford the levels for export to the US. It was also mentioned that finished leather prices were too low to break even. Chinese tanners working for their local market did not appear to be as stressed. Some people were hoping the market would go down this week, but continued demand and many suppliers’ sold ahead positions will keep upward pressure on the market.
Most people in the industry are of the opinion that the market is more bullish than bearish with little chance for a post-APLF correction. Although the jury was still out on deciding whether last week yielded a large volume of sales, bids continued to show there was interest and a number of trades were made at increased prices. Steer prices last week were up a dollar or two with $78 C&F fairly common depending on sources, selection or freight costs. Cow prices have seen mixed results with the price influenced to some extent by a number of re-sales caused by a distressed Korean tanner.
Wet blue and whole hide sales rise
The USDA export sales for the week ending 25.03.2010 for whole hides and wet blue totalled 575,006, while combined hide and blue shipments equalled 531,400. Slaughter for the same week was 615,000 head. Both wet blue sales and shipments were above their yearly weekly trends. Blue sales for the week at 212,800 compare to the yearly average of 137,425 and shipments at 165,400 compare to 137,742.
The last couple of weeks have experienced significant increases in wet blue sales and shipments, while whole hide numbers remained normal or slightly down. As hide prices have increased, it appears lately that wet blue has become an attractive alternative. Whether this is due to a sustainable increase in demand for wet blue or more with pricing remains to be seen; however, it will become clear as the year proceeds.
The US Hide, Skin and Leather Association (USHSLA) recently released an update regarding animal health certificates for hides. We’ve learned that Mexican and US authorities are still discussing the certificates. As a result of ongoing negotiations, the Mexican-proposed regulations have not gone into effect and the date of any new regulations has been postponed until April 30. For the time being, the 16-4 is still effective for shipment of hides to Mexico.
