US Perspective - 05.05.10
06/05/2010
Courtesy of www.thejacobsen.com
The US hide marketplace closed the week with a bit of a hush. Some of the slowdown can be attributed to national holidays being celebrated in various regions of Asia—China was off with the May Day holiday until May 3; Japan is celebrating its Golden week holiday, shutting down May 3–5; and Vietnam’s Labour Day is May 1.
According to pundits, prices remained steady although a few suppliers said some prices were off their highest levels. Heavy native steers sold for $72.50 (processor) to $75.50 (packer) and packer heavy Texas steers sold as high as $74.50, down to $71 for processor hides. Dairy cows were also steady, ranging from a high of $60 for premium packer hides, down to $54 for processor hides. Beef cows were a bit softer with NNC trading at $52 and NBC with a weekly high of $50 on Friday. Bulls this week sold for $61 for natives and $31 for brands.
Slaughter this past week is estimated to be 660,000, up 19,000 from the same period last week and down 6,000 from the same period last year. Earlier in the week slaughter projection by industry participants was 644,700.
The latest US export sales and shipments for whole hides and wet blue are down slightly from the previous week with a combined sales total of 599,200 and shipments of 625,700 pieces. These numbers show a fairly solid week with both sales and shipments fairly close to the week’s slaughter of 641,000.
In the past several weeks, wet blue sales and shipments appear to be increasing from the first part of the year. Wet blue sales for week ending April 22 were 168,600 and for the last six weeks, the weekly average is 172,300. These numbers are both up from the year’s average of 137,993 pieces. Exports look similar with the week’s shipments of 153,800, the six weeks weekly average of 159,800, and year-to-date weekly average of 142,775.
The prevailing winds of a booming Chinese economy are carrying with it the majority of the US hide market. This week all eyes are watching very closely for signs that the market may be toppy. For the time being, most US suppliers with good forward-sold positions still maintain hide prices will hold.
Offers from some US suppliers this week are predominantly the same as last week’s at $83.50 for HTS C&F China port, but some suppliers are asking $82 for the same selection. In China, many buyers think prices will be weak in the near future and a growing number of tanners believe the market should be $75. This gap is causing more and more to stay clear of the market. One tanner in Asia said: “Our finished leather orders are less and many of our customers (from furniture, leathergoods, to shoes) are telling us they are switching to other materials like fabric, PVC, and so on … because they cannot work out today’s leather prices with their customers.”
The one drag on the market, however, is we are currently in the process of concluding the normal busy season and approaching summer when supply is typically greatest and demand lowest. HTS have not exceeded $70 during the summer months for the past four years.
The USDA National Agricultural Statistical Service (NASS) has published the first quarter livestock slaughter report. Through March 2010, the overall US yearly cattle slaughter is up from last year by 200,000 head, or approximately 2.6%, to 8,023,000. A portion of that increase includes 15,000 cows, which amounted to a 1% increase from 2009’s 1,544,000 first-quarter cow slaughter. While this appears quite small on the surface, there was a revealing reversal of dairy and beef cow slaughter with a significant increase in beef cattle and a small decrease in dairy cow slaughter.
In this year’s first quarter, beef cow slaughter increased from last year by 66,000 head to 848,000—nearly 8%, while dairy cow kills decreased by 50,000 to 712,000—slightly less than 6.6%. The decline in dairy cows is explained by the conclusion of the 2009 Cooperatives Working Together (CWT) dairy herd reduction programme. The reduction culled over 200,000 cows from dairy herds to support milk prices.
One reason for increased cow slaughter this year is prices have gone up in cull cow prices—more than $7-$8 per hundredweight than this time last year. These higher prices are being supported by stronger demand for hamburger meat as well as lower lean beef imports.
In addition to favourable pricing, some of the increased cow slaughter can be attributed to a number of small ranchers liquidating herds because of significant costs increased over the past several years. “To raise a calf three-to-four years ago, it cost $350 to $400. That cost is now $600 due to feed, land, transportation, and fertilizer increases,” said a small farmer. A source at the USDA recounted hearing feedback that in sale-barns from the southeast over to Texas they’re currently seeing an uptick of small herd (25 to 30 head) operators opting to liquidate their herds and retire because of prohibitive cost.
Addressing the long-term outlook for cow herd size, sources at the USDA predict strong feeder cattle prices and feed-lot margins will reduce beef cow slaughter rates. They maintain, however, that we may see lower cow inventories January 1, 2011 than in 2010.
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