US Perspective—20.07.10
20/07/2010
Courtesy of www.thejacobsen.com
The US steer market was under pressure this week with prices dropping a couple of dollars for most selections. Early in the week most people were talking in the $78-$79 range (C&F China). However, by the end of the week, one or two were saying even at those levels they were not able to move many hides. Cow hides were somewhat mixed with the better grains doing better with some suppliers while lower grades did poorly across the board.
With China by far the largest consumer of US raw hides and wet blue, recent reports on China’s economic growth coincide with this recent drop in demand in the hide market. Late last week in Beijing, China’s National Bureau of Statistics announced that the economy expanded by 10.3% in the second quarter of the year over a year earlier, down from the first quarter’s 11.9%. A leading economist said economic growth is declining fast and countries that export raw materials into China will feel the impact most. Targeted growth by the Chinese government is in the range of 8%.
The USDA reported combined hides and wet blue export sales were down for the second week at 488,100 while shipments of 610,900 exceeded the same week’s kills of 602,000.
Packer margins for the week ending July 10 decreased by more than $12 per head. According to Sterling Beef Profit Tracker, average margins were at (-$7.27) per head.
Estimated slaughter for the week is 666,000. Actual slaughter for the same period last year was 634,000. Last week’s slaughter of 602,000 was significantly reduced due to the Independence Day holiday. Industry respondents to the Urner Barry poll earlier in the week projected this week’s slaughter to be 656,273.
Sales reported this week continue to fall within a fairly tight trading range, bouncing up and down from one day to the next. On Thursday, for instance, the Jacobsen Hide Index (JHI) was up $0.46 after a $0.60 drop on Tuesday.
Through week 27 this year, total slaughter is 17,323,000, exceeding combined hide and wet blue sales of 15,307,095 by 2,016,000 and shipments of 15,963,200 by 1,360,000. The chart below compares the past three year’s slaughter and combined whole hide and wet blue sales and shipments through July 10.
There appears to be a consensus within the trade that the furniture business is in the cellar and is putting a drag on the cowhide market. A couple of people have commented that there were a number of bids for special low-grade material. This may be the result of recent price drops.
Some would describe the steer hide market as currently being in a stalemate. Buyers are still very concerned about prices and many are holding back at higher levels ($80+), but appear interested with prices at $78 to $79 C&F China. For now, packers and traders maintain they are in good forward-sold positions and not anxious to take less money. Generally speaking, the shoe business and auto upholstery are keeping hides with good grain moving.
The outlook according to several pundits last week is that prices will probably hold in their current trading range for a week or so, but may give up some down the road. There is, of course, no industry-wide consensus on this matter.
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