US Perspective—28.09.10
28/09/2010
Courtesy of www.thejacobsen.com
This week the hide market took a breather following two weeks with wet blue and whole hide sales in excess of 700,000. Even with decent slaughter numbers, suppliers were sufficiently comfortable with their positions to ask for more money and resist lower bids. With much of the Asian market resting for the Mid-Autumn Festival, and higher prices, the market stalled.
Tanners continue to express concern about pricing and several are warning that shoe brands are in the process of designing more synthetic material, which will have a lasting effect on the leather market. The shoe business has been solid with positive signs from early back-to-school sales results. The brands, however, are extremely margin-sensitive and are not willing to concede to price increases if it means reduced returns.
Prices remain steady-to-firm with HNS and HTS ranging from $70 to $73 and BS from $67.50 to $71. Considering people’s expectations for slow trading this week, there was enough business and interest to have a few leaning on the bullish side and looking forward to next week’s market.
Estimated week-ending slaughter at 663,000 is down 12,000 from last week. It’s up 15,000 from the same period last year.
Corrected whole cattle hides sales for the week ending September 16 were 513,800 pieces. They were mainly for China (273,300 pieces, including 10,800 pieces switched from South Korea), South Korea (88,300 pieces), Hong Kong (29,300 pieces), Taiwan (28,200 pieces), Vietnam (22,600 pieces, including 1,800 pieces switched from Hong Kong), and Thailand (18,200 pieces). Exports of 501,400 pieces were down 1% from the previous week and from the prior four-week average. Whole cattle hides exports of 496,900 pieces were primarily to China (257,500 pieces), South Korea (115,800 pieces), Taiwan (28,000 pieces), Mexico (22,300 pieces), and Japan (15,100 pieces).
Net sales of 205,500 wet blues for delivery in 2010 were up 50% from the previous week and 84% from the prior four-week average. The primary buyers were China (75,900 unsplit), Vietnam (39,000 unsplit), and Italy (22,000 unsplit). A decrease was reported for Thailand (400 unsplit). Exports of 164,200 hides were primarily to China (47,200 unsplit), Italy (28,100 unsplit and 1,800 grain splits), the Dominican Republic (12,800 grain split and 9,300 unsplits), and Mexico (19,100 grain splits and 1,100 unsplits). Net sales of splits totalling 175,500 pounds were reported for South Korea and Indonesia (2,000 pounds). A decrease was reported for Hong Kong (1,500 pounds). Exports of 469,000 pounds were to South Korea (376,600 pounds), and Hong Kong (92,500 pounds).
As heifers are becoming scarce with the end of summer, several people commented they are tightening their sales to current production. Consequently, there has been an up-tick lately of people looking for this selection. While heifers are slaughtered year round, the quantity of lighter-weight hides dries up as overall hide weights increase for the winter. Corresponding with the change, Jacobsen will be changing to winter weights on October 1.
Through week 37 this year, the accumulated total slaughter is 23.87 million, averaging 645,297 cattle weekly. Marketing or sales of whole hides and wet blue through the same period is 21 million in total or 568,532 average weekly pieces. Shipments meanwhile total 22.1 million or an average of 598,237 per week. So the slaughter, sales and shipments numbers for 2010 are 23,876,000, 21,035,695, 22,134,800. For the corresponding period in 2009, the numbers were 23,480,000, 22,823,100 and 23,989,900 respectively. For 2008, they were 24,427,000, 23,111,800, and 23,608,400.
The week continued at a slow pace in the hide market with buyers waiting for lower prices and sellers asking for more money. Sources noted seeing offers up as high as $2 for some steer selections, but also expressed doubt that there would be many, if any, takers. For the moment, there is not much going on besides fishing and waiting. Several suppliers report there is interest but one qualified this remark, saying that interest was “there for low prices but minimal for prices they need to get”.
The results of this year’s US retail sales are being closely watched by the shoe brands and side leather tanners. In a recent report for Shopper Trak’s, weekly 2010 retail, back-to-school sales for the month of August rose 3.7% compared to the same time in 2009. While these numbers are up, it should be noted that retail sales in 2009 for the same period were down 5% from 2008.
In the furniture upholstery market, tanners are closely watching the housing market. In August, home construction increased 10.3% from the previous month, mostly driven by condominium and apartment homes. Single family homes, which represent the majority of the housing market, grew by over 4% in August. Single family home construction is up nearly 11% from January 2009, but still down 78% from January 2006. While any positive news is good, the sluggish housing sector with its enormous inventory of foreclosed homes continues to be a drag on the economy. According to economist, Gary Shilling, residential construction was 6.3% of the GDP at its peak in 2005 and 2006, but has fallen to 2.4% this year.
The most recent USDA Cattle on Feed report results were significantly different from analysts’ expectations. The number of cattle placed on feed last month was 2.27 million head, 7% above August 2009. Cattle on Feed this past September 1 totalled 10.2 million head, which is 3% above the same date in 2009. These larger-than-expected results will help ease the tight cattle supplies expected this coming winter.
Offsetting the higher placement numbers, cow slaughter continues at a higher rate than normal and heifers are making up a larger share of cattle slaughter than last year. Both these factors suggest a potential for declines in the national beef cowherd, which ultimately will tighten feed cattle supply.
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