US perspective - 22.06.2010
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
During the week before last, the market was once again mixed with steer hides steady to firm and cow hides continuing to struggle. There was a glimmer of light, however, with a couple positive reports from suppliers regarding their cow positions. The week’s hide index average was $68.13, up $0.69 from the previous week’s average. In general, the steer market was up at least a dollar while most cow selections remain steady.
Weekly slaughter for that week was estimated to be 661,000 head, down slightly from last year’s 666,000. For the year, federally inspected slaughter was up 3.3%, but recent trends in the ratio of fed steer/heifer-to-bull/cow kills may have been adding to the dynamics of the firmer steer market and softer cow market. For instance, fed steer heifer slaughter was 525,000, down 1.3% from the same period a year ago while cow/bull slaughter was 136,000, up 4.6%. Cow slaughter was higher than normal all spring and will continue into the summer in light of an upcoming dairy herd reduction programme.
Coming back to the week just gone, Monday June 14’s North American hide market was quiet with only a limited number of sales reported. One carry-over sale for HNS at $73 was reported along with a couple of HBH at $58 and $61. Several people commented that they expected to see more pressure on cow hides during the week. However, many parts of Asia started a three-day holiday on Monday in celebration of the Dragon Boat Festival.
Tuesday began with a statement that the market had some carry-over momentum from the previous week. Several early trades for steer hides including HNS at $74 HTS and BBS at $73.50 pushed the steer market’s upper end up from $1 to $2.50. On the sheet, the butts last traded on the high side at $71. Cow hides did not follow steers in their latest move up and continued to be under pressure. One source noted on Tuesday that most of the bids they had seen for cow hides were lower.
The $73.50 to $74 prices reported on Tuesday surpassed the $80 threshold C&F, which Asian tanners had been very resistant to cross. With a number of Chinese and Taiwanese tanners off for the festival, everyone was waiting to see whether there would be any follow-through volume at this higher trading range when they returned at the end of week. Feedback from Europe and Brazil on Tuesday was more upbeat than past reports. Several sources noted there was a more positive tone in the marketplace with prices steady to firm.
With many of the Chinese and Taiwan tanners on holiday, early-in-the-week bids were scarce. Sources noted that most suppliers’ asking prices for steer hides were around $80 to $81 C&F Asian ports. The $80 price point was a strong barrier to overcome and most likely contributed to the anaemic response, but time will tell if the market will support the $80 plus level.
Only two sales were reported on Wednesday and both were down. Several people commented that they had received a few bids from Korea but their prices were low.
Almost everyone described the market as quiet on Thursday as both buyers and sellers paused after a strong week the previous week and a shortened holiday week because of the Dragon Boat Festival. However, the trades trickled in until there was a fairly large quantity for a “quiet” day. A number of suppliers indicated they were not offering anything and a number of tanners noted they were taking the rest of the week off. According to several suppliers, bids from Wednesday night—the first day of work following the Asian holiday—were scarce and did not show much of an appetite for steer hides in the $80+ trading range.
In spite of a subdued start, a fairly large number of sales was reported by the end of Thursday. Trading levels were mixed, but most of the sales fell within the previous week’s price ranges. One exception was a heavy native steer trade for $75 which was a dollar above its previous high.
There was not much activity in the marketplace on Friday. A moderate number of sales was reported with prices falling within the week’s trading levels, but off from some of the high marks. Holstein dairy steers were the exception selling for $75, a new high.
The week in review
The week was relatively quiet, affected by the Chinese and Taiwan tanners who were off celebrating the Dragon Boat Holiday from Monday to Wednesday. Upon returning, tanners were not happy to see another round of price increases pushing hide prices past the important $80 barrier. While a few needed to buy, many chose to wait for the market to cool off.
USDA export sales and shipment report for whole hides and wet blue exceeded 757,000 pieces; the highest number this year. This followed a relatively anaemic week the previous week. The week wrapped with estimated slaughter at 667,000, up 6,000 from the same period last week and down 6,000 from the same period last year.
Steer prices remained steady to firm. A few new high marks were reached, such as HNS at $75 and BBS and HTS both at $73.50, but most of the steer selections traded at the same levels as they did the week before. Cowhide sales continued to be more difficult than steer hides but prices finally levelled off, prompting some to believe that they have bottomed. A few people are still quite concerned for the cow market.
Packer margins decreased by more than $50 per head. The Sterling Beef Profit Tracker for the week ended June 12 placed average packer margins at (-$28.97) per head.
The June 1 announcement from the Cooperatives Working Together to liquidate another round of dairy cows will add to the increase in cow slaughter this summer and keep pressure on the cow hide markets for some time to come. The quantity of cows culled in this round of herd reduction will not be known until the end of the bid on June 25. Sources estimate the number may be as high as 60,000 head.
