US Perspective—18.05.10
18/05/2010
Courtesy of www.thejacobsen.com
The hide market appears to have lost its footing this past week. Market momentum was halted as prices stopped their ascent and early this week began to fall off. Week on week, prices are only off around $0.65, but declined over $1.50 on Thursday alone.
The market on Friday was mixed with few selections bouncing back from the previous day’s lows. Price increases for HNS, BS, and HTS on the higher end of the spreads bringing the overall Jacobsen Hide Index back up to around $70—down $0.94 for the week. HNDC and BS saw large increases, which made up for their huge declines on Thursday. Day on day, the HNDC selection was down $4.50 on Thursday, rebounding $3.50 on Friday to $55.50. BS on Thursday fell $4.25, but rebounded $3.50 to $72.25 on Friday.
Estimated slaughter for the week is 671,000, down 2,000 from the same period the week before and down 6,000 from the same period last year. Industry participants in Tuesday’s Urner Barry survey predicted average slaughter to be 671,730—fairly close to target.
Buyers are seeing more offerings and availability for quicker deliveries. Several people recounted experiences with suppliers asking buyers if they wanted quicker deliveries than originally planned with the hide purchase. Cows continued to be under pressure dropping around $1 on most selections. Cow hides were also pressured with NHNDC taking the biggest hit with one processor trade dropping the selection $4.50.
Wet blue and whole hide export sales and shipments reported by the USDA for week ending May 6 (Week 18) are below the week’s slaughter of 672,000, but show a significant pickup in both sales and export shipments. For the week, combined hide and blue export sales numbers were 567,700, up from the previous week’s 522,000 by 77,200. Combined hide and blue shipment totals were also up with 629,800 pieces for the week; ahead of the previous week’s 539,700 by 90,100.
This year through Week 18, combined whole hide and blue sales are 1,258,805 behind slaughter and shipments are 974,600 behind. In both years 2008 and 2009 through the same period, combined blue and hide sales were greater than kills. Shipments in 2009 were also ahead for that year’s slaughter. As a bit of trivia, the highest US weekly cattle kill since 1993 was in the first week of June 2003 at 792,700.
In the middle of the week, price support for steer hides came off with a number of suppliers taking lower prices. This caught the eyes of many foreign pundits with at least one reporting service making note that this news may be the beginning of a market correction.
A reliable source in Shanghai reported that offers from US suppliers are reduced from last week by around $2 for cow hides and $1-$2 for steer hides. Several agents in China confirm there was not much business activity this past week as buyers wait to see what the market will do.
A number of suppliers remarked at the start of the week that although bids were lower, they were seeing a fairly large volume of bids. This shows that there is leather business, but the hide prices do not work for the tanners. The buyers’ engagement in the market at lower prices indicates their interest in rolling prices back some, but also their need to purchase. This should prevent a severe decline in prices and help establish a floor on the hide market.
Suppliers have tried to maintain as positive a face as possible on the market. We expect there will be more efforts from Asian tanners to lower steer hide prices. Bids from China for HTS have been reported at $79 C&F for steer hides, which could be in the range of $71 to $72 FOB. There was one unconfirmed trader sale for steer hides at $80 C&F China mentioned.
A reliable source indicates offers out of Europe for cows are $5 down. Although in the US many people maintain that plump cow hides are under the gun, there was an offer for NHNC at $58. The buyer, who had a much different idea on pricing, did not snatch up the offer.
More than likely, cow hides will see the effect of downward pressure before steer counterparts.
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