US Perspective--30.03.10
30/03/2010
Courtesy of www.thejacobsen.com
Here's the Jacobsen part:
Market activity and analysis
The market was extremely quiet on Monday. There were only two sales reported and both were branded steers. As more often than not for the BS selection, the trades maintained a fairly large spread; from $63 for processor to $68 for packer hides.
The market was inactive again on Tuesday with no sales reported. A number of people commented they were surprised at how quiet it actually was.
The market remained relatively quiet on Wednesday with a limited number of packer sales reported. Prices fell steady within the previous week’s trading range with the exception of new highs for heavy branded steers at $70 and heavy native heifers at $63. NNDC at $58 showed a $3.50 increase on the day but the price was unchanged from the higher end of the selection’s spread.
Only a few trades were reported on Thursday with prices mixed. Heavy native steers reached a new high of $73.50, butts were steady and cows were down.
The market ended the week with the majority of sales reported bunched in the last days and overall the number of reports down. This was not surprising given that many people were reporting from abroad ahead of the Asia Pacific Leather Fair (APLF). Prices on Friday were mixed with no significant changes to trading ranges.
Heifer kills up
The USDA released its National Agricultural Statistical Service (NASS) Livestock Slaughter Report for February on Friday. Total cattle kills for the first two months of the year amount to 5.147 million head, around the same as in 2009. Within the mix of selections in 2010, there is in increase in heifer kills and a corresponding drop with steers and cows. In the first two months of 2010 versus 2009, heifer slaughter increased from 30% to 31.4% while steers fell from 48% to 47.5% and cows from 20.5% to 19.6%.
Cow kill reductions in January and February were all from dairy cows which decreased from 10.2% in 2009 to 8.8% in 2010. In 2009, dairy organisation Cooperative Working Together (CWT) sponsored a herd retirement programme, which was a major influence in higher dairy cow slaughter. In total, the programme resulted in the removal of more than 200,000 head near the end of 2008 and during 2009 in an effort to enhance milk pricing.
Slaughter at 615,000 this week was down 1,000 from the same period the previous last week. Slaughter for the same period last year was 618,000.
Whole hide and wet blue sales beat expectations
The hide market remains firm; however, not much follow-through business is occurring. There is broad interest at steady-to-lower levels but the interest dries up at higher prices with strong resistance to higher trading levels. The USDA export sales figures released on Thursday revealed that the prior week’s sales of whole hides and wet blue shot up to a combined 689,287. These sales numbers surpassed both the week’s slaughter of 616,000 and combined shipments of 597,600 by a significant amount. The weekly sales were spurred by wet blue at 269,287 pieces, a level more than twice the year’s weekly average of 130,572.
For the year, weekly sales of hides and blue totals are averaging 549,580 pieces, closing the gap with shipments at 568,000. With the year’s average weekly slaughter at 629,900, weekly kills are approximately 80,000 greater than sales and nearly 62,000 pieces more than shipments.
Resisting higher prices
In anticipation of the APLF in Hong Kong, the market last week was focused on Asia. Offers were largely held back by suppliers with many of the people travelling preferring to carry their offerings into face-to-face meetings with tanners either in their factories or at the show. Some people in the trade were viewing the lack of offers as a show of strength by suppliers.
The limited feedback we received regarding the tone of the market suggests there is strong resistance to the high prices. Prices continued to increase last week with a source indicating HTS asking prices as high as $78 C&F Asian Port and HNS from $78.50 to $80 per hide. These prices were being met with strong resistance and many buyers chose not to buy. Tanners were waiting to see more clearly where the market would end up and were making it very clear to visiting suppliers that current prices are not tenable.
In an attempt to understand what is giving the hide market its momentum, many are focused on reductions in hide supply as a possible driver. This year, global hide supply is running behind 2009 in most regions throughout the world. In the US, some industry pundits forecast hide supply to be down 3%. Although this reduction has not occurred to-date, recent weekly slaughters have begun to drop off and other indicators such as cattle on feed point toward reduced kills for 2010.
So far this year, the US slaughter/hide supply numbers do not appear to have fallen or changed to a degree that would have fuelled the hide market to the prices experienced lately. Within the domestic production of wet blue, however, there have been some upward shifts in export numbers that have negatively influenced hide availability. This, in turn, would have a positive effect on the hide market.
Approaching 2007 levels
From 1998 through 2009, wet blue export shipments peaked in 2007 at 6,702,168 or 138,500 hides per week. By 2009, wet blue exports dropped off to 113,444 average weekly shipments. This decline was influenced by factors such as the economy and changes/reductions within the wet blue manufacturing community. During the first ten weeks of this year, the number of wet blue hides exported increased to 132,560, nearly back to the ten-year high in 2007.
This increase in wet blue shipments supports the possibility that the current hide market rally is due to reduced hide availability—more hides going into blue results in less that are available for sale. What is not known at this time, however, is the number of hides being converted into wet blue that have not been sold or shipped. With wet blue manufacturing capacity around 200,000 weekly, there could be many more hides taken off the market that do not show up in the USDA statistics. This number could be large enough to have a serious impact on hide availability and, consequently, the hide market.
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