US perspective - 27.04.2010
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
There was not much activity in the hide marketplace on Monday as buyers and sellers determined their requirements and positions. The hide market remained quiet on Tuesday with only a few sales for packer BBS reported and overall prices holding steady.
The market was also fairly quiet on Wednesday with a limited number of sales reported. HTS held steady with the previous week, and heavy HNS were up at $75.50 on the high end. Cows and branded bulls were down from the previous week but within the week’s trading range.
On Thursday the market appeared to be reserved with very few steers reported at prices steady with the week’s trading range. A limited number of cows and bulls were sold with prices steady to down slightly. Several people commented that business had slowed but it should be noted that a limited quantity of steer hides was offered.
The market on Friday ended the week with very limited activity; however, prices were mostly up with new highs for HNH at $64 and N Bulls at $66. Colorado steers were also up between $0.50 and $1 at $60.50 and $66.
Looking back
The hide market the previous week remained firm with the Jacobsen Hide Index weekly average up $0.86 at $68.94. The index had increased by over $3 in the 30-day period ending April 16 at $69.31. This was up slightly from the week’s average, but steady with April 15. Driving the weekly increase was: HTS, up $2 to $72 average; BS, up $1 at $70.50; and HBH, up $1 from the previous Friday’s prices. The other steer and heifer selections remained steady.
With April 16’s HTS average at $72, it is still $3 under the level when it peaked in February 2007 and reached $75.08 for the monthly average. Jacobsen archives show prices ranged from $73 to $77 on the selection for much of the month. For comparison, the range on April 16 was between $70 and $74.
Following the five-year apex of the HTS market in February 2007, there is a fairly steady decline in HTS prices to a trading range in the mid-$60s where the market levelled off until it tanked in the autumn of 2008. The crash in 2008-09 began with the subprime home mortgage meltdown, which affected the lower-end Brazilian hide/leather market and later the US cow market when the Italian upholstery tanners stopped buying hides. Following this, the auto companies began experiencing declining sales and suddenly stopped all buying. This dragged steer prices to unprecedented low levels.
Price points
Last week in the US hide market the questions were if, and when, heavy Texas steer prices would break $75 from the previous week’s high of $74. Sources reported offers above that level on Wednesday but as of the end of trading that day there were no takers.
As predicted, suppliers limited offers with more lightweight than heavyweight material available. This tied into the recent declines in live slaughter weights being reported. The previous week, both steer and heifer weights at 1,292 and 1,160 pounds were down from the same period last year by 1.6% and 1.9%, respectively.
Resistance to higher prices continued to grow with more and more buyers refusing to participate at the levels available. Many buyers were trying to buy under $80 C&F against asking prices of between $82 and $84. The gap between buyer-seller notions of prices is great and where the market will top is on the minds of almost everyone in the trade. One pundit put it well by stating: “Only when enough refuse to pay increases will the market calm down.”
Sales and shipments still behind kills
The USDA whole hide and wet blue export sales and shipments report for the week ending April 15 is split, with combined sales totals under the week’s slaughter of 636,000 and shipments over. For the week, sales of combined whole hides and blue totalled 590,700 and shipments totalled 662,500, with sales under kills by 45,300 and shipments over by 26,500. In 2010, sales and shipments are still behind kills from the previous two years.
Whole hide sales numbers experienced an unusually large amount of corrections resulting in a negative adjustment of 81,103 pieces. Net sales also revised downward to 408,474 from 489,577. The three countries with negative adjustments were China (52,912), Taiwan (21,392) and Korea (18,652), while Hong Kong had a positive correction of 13,571.
Slaughter for the week was estimated at 641,000, up 5,000 from the same period last week and down 9,000 from the same period last year. Actual slaughter for week ending April 10 reported numbers at 619,346, up from the week’s estimated kills of 616,000. Kills that week comprised 50.7% steers, 27.9% heifers, 19.4% cows and 2% bulls.
Slow end to the week
The market ended the week quietly with many people wondering whether it was topping. In the case of beef cows, increases in slaughter and reduced demand for upholstery hides seem to have been a dampener. One tanner reported that for the first time in a long time, a supplier asked his company to make an offer on native cows, implying the possibly that they were backing up. Dairy cows are selling better than beef cows and this may be due to April 20’s foot and mouth outbreak in Japan, which resulted in a temporary ban on beef exports. Also, beef and dairy cows serve two different markets.
There was reduced activity this week in the steer market with signs of resistance to higher prices. A number of extremely low bids were reported, but there were no takers at the low levels. One supplier said that steer/heifers were hard to sell and a few people expressed that the market may be running out of steam.
