US Perspective—27.07.10
27/07/2010
Courtesy of www.thejacobsen.com
This past week the hide market grudgingly gave some ground with prices off from $1 to $1.50 in some steer selections. There was unconfirmed talk that a fair amount of business was done with traders who helped clean up the positions of some packers. As far as volume is concerned, sources have mixed positions with some reporting they moved a fair amount of material while others had a slower week. The quantity of sales reported this week was lower than average.
In the most recent US Department of Agriculture export sales report, for week ending July 15, the large number of hide contract cancellations (435,337) prompted a number of questions in the trade. This was the largest correction that a number of pundits in the trade could ever remember. In a conversation with The Jacobsen, a spokesman for the USDA Foreign Agriculture Service indicated that USDA will be looking into the cancellations in more detail and if changes are required will make adjustments next week.
The majority of these cancellations were largely from a single source and not from a large number of small contracts taken off the books. It is possible that the cancellations could be from reported sales from 2009 that were carried over into 2010. In 2009, 3.7 million hide sales were carried over into for delivery in 2010. Of that number, 1.8 million were destined for China. Last week’s cancellations to China were 321,000.
The week-ending slaughter is estimated to be 666,000—the same as the previous week. Actual slaughter for the same period last year was 622,000. Earlier in the week, the Urner Barry poll of industry participants estimated that the expectation for cattle hide slaughter this week was 654,667.
There was an interesting array of descriptions for the market including “hanging in there”, “sludgy”, “entrenched”, and “not going down much”. For the most part, however, the market is holding steady. A fairly small number of trades were reported on Thursday with prices up on several selections. These increased selections included a packer heavy native steer at $74 as well as native dairy cows and native cows.
Bids in a number of cases were lower than where suppliers are willing to sell. Depending on positions, some will hold off this week before accepting lower prices. Generally speaking, steer bids were close to the previous week’s bids at $78 to $78.50. Cow prices according to several people appeared to be mixed. In one case a supplier said that cow prices have levelled off, but another reported seeing lower bids.
Recent data from the US National Association of Homebuilders does not add any encouragement in the housing sector for the near future. In a report on Monday, the association said its reading on builders sank to its lowest level since March 2009. Builders have dramatically scaled back new home construction with May’s new home sales at 213,000—the lowest level in 40 years.
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