US perspective - 29.06.2010
The Jacobsen Commentary and Market Opinion – 29.06.10
Courtesy of www.thejacobsen.com
On relatively light trading the week before last, the North American hide market traded steady to firm. There were a few steer selections that reached new levels and by Friday June 18 the week’s average Jacobsen Hide Index (JHI) had increased by approximately $0.80 from the previous week’s average. Lightweight BBS and HTS averaged $71.50 and $73, respectively. Cow hide prices on the Friday were mostly unchanged from a week ago.
By Monday of last week (June 21) most people in the trade were looking to garner information as to how the market would start off. Most were expecting that suppliers would hold steady to the previous week’s higher-priced offerings and that tanners would be keen to not jump over the $80 C&F steer hide price barrier. Besides the posturing for advantage, there was very little activity in the marketplace. There were no carryover trades from the weekend or any new sales reported on Monday.
The hide market was sluggish but steady on Tuesday with a number of people bracing for a week of standoffs in the steer hide market and weakness in the cow market. Steer hides were well sold by many suppliers and decent global leather upper shoe business was keeping them in need. A number of people noted on Tuesday that cow hides were becoming more difficult to move. One trader said that bids on cows were $5 to $6 under his asking prices and that it was impossible to find any counters.
There was a modest number of sales on Tuesday with prices mixed and most within the previous week’s trading ranges. Two exceptions were HTS at $74 and native bulls at $60, both new highs. Processor heavy native steers on the low end sold for $70 while packer hides traded for $74.
As the equities markets reacted negatively to poor housing sales reports for May—in spite of the $6,000 to $8,000 government stimulus for home sales—the steer hide market continued to be steady to firm. The Dow Jones Industrial Average dropped 148 points on Tuesday following a negative day on Monday. On Wednesday the markets were all over the place, beginning in red territory, switching to green, and finally ending the day mixed, but reminding us all how fragile the recovery is.
The cow hide market appeared to be linked more closely to the recent economic doldrums than the steer market. Cow hide sales continued to be difficult due to poor furniture upholstery leather business. On the other hand, a number of people were contending that bids on steer hides were plentiful and steady with the prior week. One source cited a bid for BS up a dollar, but generally there still remained a divergence between bids and offers for steer hides up to $3 to $4. Offers for the first half of the week were limited, depending on each supplier’s particular position. Sources indicated C&F HTS and HNS between $81 and $82. Speculation was that few would be willing to pay these amounts, but that small quantities might be purchased.
Trades reported on Wednesday were steady, all falling within the previous week’s price ranges with the exception of CBS at $66, up $2. Volume was modest but not unusual for the time of week.
Trading volume on Thursday was moderate with most prices within the prior week’s trading levels, although there were a few exceptions. These included heifer prices with a new high of $65 for HNH and $64 for HBH. On the down side, a number of cow selections reported lower for the day. These included NNDC and NNC, down $2.50 and $2 at $47 and $44, respectively. Northern brands and south-western natives were also down, but only a dollar. Comments in the trade were mixed and a bit confusing with talk of large number of steer hides sold but conflicting reports of limited availability of steer hides. Cow hides continued to be under pressure.
The market on Friday was very quiet with only two sales reported. HNS were steady with yesterday’s high at $74 and Jumbo Texas steers sold for $78. The market ended with steer hides fully steady with a slight up edge and cow hides difficult to sell. Several people noted that they didn’t think that many hides were sold during the week given the stiff resistance from tanners to higher steer prices.
The week wrapped with estimated slaughter at 667,000, a tie with the same period last week and down 3,000 from the same period last year. Industry respondents to the Urner Barry poll taken earlier in the week estimated kills for the week to be 666,891.
The week in review
The hide market continued its path of divergence with steer hides firm and cow hides soft. Meanwhile, buyers in Asia were resistant to prices for steer hides beyond $80 C&F Asian port.
Steer prices remained firm but traded close to the previous week’s levels. The Jacobsen Hide Index this week averaged $69.15, up $0.23 from the prior week’s average. Butts, heavy Texas steers and heavy native steers traded at prices between $72 and $74 with a few exceptions above and below. Cow hide prices dropped on several selections between $1 and $2.50.
The equities markets reversed their recent positive trend, falling four out of five days of trading. Poor housing numbers for May released early in the week, followed by a disappointing forecast from retailers and concerns about the government’s financial overhaul package later in the week, helped spur this reversal. Nike shares dropped 4% after the company said increased costs might hurt earnings.
Cattle feeding margins decreased more than $23 per head last week while packer margins improved slightly. Sterling Beef Tracker for the week ending June 19 was $95.56 for feedlot margins and -$26.18 for packer margins per head.
Thursday’s USDA export report for Week 24 sales and shipments—to no one’s surprise—was down considerably from the previous week. Whole hide sales for the week had the most dramatic difference with 282,600 pieces sold compared to 700,000 the previous week. So far, the yearly average for 2010 is 432,735. Combined wet blue, whole hide and wet blue sales totalled 441,700 compared to 757,500 the week prior and 564,658 for the year.
The whole hide wet sales were reduced by 104,545 pieces which comprised a number of negative and positive adjustments. Reductions included China, (74,641), Korea (24,124) and Mexico (18,401). There were positive adjustments of 10,961 in Vietnam and 6,800 in Germany, offsetting the cancellations.
Exports for the week were closer to yearly norms with combined hide and blue exports of 584,300. The yearly average, by comparison, is 589,154. Total shipments for the year are 14.14 million compared to kills of 15.39 million with an accumulated difference of 1.25 million pieces.
