US Perspective—12.05.10
11/05/2010
Courtesy of www.thejacobsen.com
The turbulent roller-coaster ride in the stock market is a reminder of the fragility of the recent gains in the global economy following last year’s financial crisis. The market dropped nearly 1,000 points in less than half an hour on Friday and ended the day down 374 points. Fears that Greece’s debt problems might spread throughout Europe had the market down around 200 points when a trader reportedly mistyped an order, triggering sell orders across the market. The Dow Jones Industrial Average lost 631 points or 5.7% in the middle of last week and then fell further on Friday. “Ouch!”
The hide market this past week was under pressure but has not parroted the volatility of the equities markets. Most suppliers noted seeing bids at considerably lower prices; however, trading levels reported indicated much more controlled market activity. Steer prices remained relatively unchanged although there has been a fair amount of bouncing prices from one day to the next. Cows hides did not hold, dropping $1-$2 on most selections.
Although steer prices may not have changed, it is doubtful much volume at current price levels was consummated. Several suppliers indicate their counter offers were passed on—and in one case, the buyer withdrew the bid completely.
Slaughter is estimated to have been 673,000, up 13,000 from the same period the previous week and up 18,000 from the same period last year. Participants in the Urner Barry survey earlier in the week forecast this week’s slaughter to be 658,583.
Wet blue and whole hide export sales and shipments were down as reported by the USDA, for week ending April 29 (Week 17). Combined hide and blue export sales numbers were 522,000, down from the previous week’s 599,200 by 77,200. Shipment totals looked similar with 539,700 pieces for the week; behind the previous week’s 625,700 by 86,000. Both sales and shipments also fell below the week’s slaughter of 660,000.
A comparison of sales and shipments over the last three years shows that 2010’s unique characteristic is the larger gap between supply (slaughter) with sales and shipments than the previous two years. Through week 17 this year, combined whole hide and blue sales are 1.153 million and shipments 0.931 million behind the years’ accumulated slaughter.
The hide market on lower volume began to show signs of weaker underpinnings as the Jacobsen Hide Index dipped slightly to $71.09 from $71.20 in the middle of last week. There are rumblings in the trade beginning to surface that one or more suppliers have made lower priced offers for steer hides which are being used by buyers to leverage sellers to follow suit. Hide suppliers with solid forward positions are not anxious to take the bait, but if hides begin to back up that may change.
Beef cow hides sales over the past couple weeks have been down, with upholstery tanners refusing to pay higher prices.
The US dairy cow market has been boosted by an outbreak of Foot and Mouth disease in Japan, stopping the export of Japan’s cow hides into Korea. The disease outbreak has also been confirmed in Korea and recently in China. Sources indicate that authorities have confirmed foot and mouth in several Chinese provinces that include Guangzhou, Beijing, Xinjiang, Shandong and Hebei. About 8,000 cows have been killed in the province of Guangzhou. Since China is a major importer of hides, the primary impact on the US hide market should not be significant unless the outbreak affects large numbers of cattle in China.
In spite of the noted price increases, there are a number of pundits in the trade who feel the market is “tired” and has reached the end of its rally. Although no one has a crystal ball, historical references point toward higher summer supply and lower prices as a safe bet. There are no guarantees however, and still plenty of bulls who feel the market has no reason to let up and will not follow its usual summer rollback.
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