US perspective - 15.06.2010
The Jacobsen Commentary and Market Opinion – 15.06.10
Courtesy of www.thejacobsen.com
The market was fairly quiet on Friday with most of the purchasing accomplished earlier in the week and a couple of suppliers pulling out mid-week. Only a small number of trades was reported on Friday with prices consistent within the week’s trading range. One supplier noted there were no steers to be had by the end of the week.
Business on Thursday was said to be quite active by several people; however, reported trades reflected a more moderate day and one or two people noted that business was slow. Sales reported were mostly packer hides with HTS ranging from $70 to $72, BS from $67 to $72, and CBS from $64 to $66. Trades pushed the Jacobsen Hide Index (JHI) up $0.65 to $68.58.
It appears that enough buyers have shown interest in US steer hides to reverse the direction of the sliding steer market. Last week, offers were up around a dollar and a few tanners followed the market. One source from China reported on Thursday: “Last week HTS could be bought easily for $78 C&F, but this week the number is $79 C&F China. Buyers, however, are not overwhelmingly ready to pay this price yet.” Depending on source, destination and added charges, these prices translated roughly to $71/$72 FOB.
Trading on Wednesday was fairly quiet with the suppliers not needing to sell large quantities of steers and buyers not looking for many cows and bulls. In some cases, steer hides may be up a dollar, but several steer trades reported on Wednesday were down from Tuesday’s sales.
Trading on Tuesday was slower than on Monday but continued to support the premise of a stronger steer and heifer market and wandering cow market. Packer BS sold up for $71, while HTS held steady at $71.50. NHNDC had a wide spread ranging from a low of $49 for processor cows to a high of $55.50 for packers.
The market on Monday was relatively active with a large number of sales reported, particularly for a Monday. Reporting was mostly for processor sales, which rolled prices back on several selections. Sources on Monday predicted that steer hide offerings would be limited and prices would likely be firm. Cow hides were expected to be more plentiful, continuing to put pressure on prices.
The week’s highlights
The week’s slaughter was estimated at 661,000, up 36,000 from the previous week’s reduced kill due to the holiday and down 5,000 from the same period last year. The week’s hide market appeared to be firm with an uptick in steer hides, continued pressure on cows, and bulls with limited volumes sold.
The USDA whole hide and wet blue sales and shipment numbers for the week ending June 3 were relatively anaemic. Combined whole hide and wet blue sales equalled 468,600 and shipments 573,800. The steer market was firm with prices up around a dollar. HTS sold for $72. Cow and bull hides continued to be under pressure although suppliers were starting to note they are improving their position with cow hides.
Leather business continued to be fairly decent for upper shoes in China, while furniture upholstery was not doing so well. Recent concerns of auto leather business slowing down were raised by a couple sources. Packer margins decreased by more than $14 per head. The Sterling Beef Tracker margin for the week ending June 5 placed average packer margins at $21.94 per head.
There appeared to be two distinct hide markets, with steer and heifer hides holding steady to firm while cow hide sales were under the gun. The steer/heifer market was being supported by carryover spring leather production for autumn shoe business as well as decent Chinese domestic shoe business. The cow and bull markets were pressured by weaker furniture upholstery business. On the supply side, while total cattle slaughter was slightly up from last year’s numbers, cow slaughter was higher than a year ago and steers/heifers lower.
Looking forward, increases in the hide market will be influenced greatly by demand and the jittery world economy will be a factor. The recovery of the global recession has been dampened by financial woes in Europe as well as slowing job growth here in the US. Just last month, non-farm jobs in the US grew by 431,000—of which 412,000 were temporary government jobs for the 2010 census. The net private sector job growth in May was only 41,000. For the economy to remain flat, 125,000 jobs need to be added each month, which suggests that the economy became weaker in May.
