US Perspective—21.12.10
21/12/2010
Courtesy of www.thejacobsen.com
This week in the hide market was transitional following the run-up of hide prices to near-record levels over the past month. To a large extent, hide producers held back offers, presumably because of their favourable positions. Buyers at the same time seemed content to sit the week out.
One of the factors at play in the hide market this week was that the recent urgency of orders requiring delivery ahead of the Chinese New Year (February 3, 2011) is about over. This coincides with the conclusion of buyers stocking up on as many of the summer and fall hides before the onset of the less desirable winter hides. It is hard to know if either of these points were major contributors in the market’s rally, but the next couple of weeks will give us a better idea, depending on whether the market cools or continues to be firm.
Slaughter this week is estimated to be 659,000 head, down 15,000 from last week’s estimated kill. Earlier in the week, the Urner Barry poll of industry respondents forecast the average estimated slaughter for this week to be 662,500.
US hide prices are still firm with less activity than in the past few weeks. There were only four sales reported on Thursday, which is very unusual. While prices were consistent with last week’s trading levels, the limited volume makes it difficult to gauge the market.
USDA sales report for week ending December 9, export sales were below the week’s shipments and slaughter. For the week, combined wet blue and whole hide sales were 595,900 and shipments were 646,900. Slaughter for the week was above both sales and shipments at 674,000. While last week’s combined sales were exceedingly high at 861,100, the average combined sales over the past four weeks levelled off at 676,175 which is still above the year-to-date average of 592,330.
The chart below shows the three-years-to-date comparison of combined hides and wet blue sales and shipments with slaughter. Through week 49 of this year, slaughter is 3.1% above the same time last year and sales 2.1% behind. The slaughter, sales and shipment figures for 2010 are 31,877,638; 29,024,195 and 29,613,100. For 2009, the corresponding numbers were 30,913,249; 29,667,400 and 30,950,900, while the figures for 2008 were 31,893,779; 29,810,400 and 30,562,700.
Heavy weights and jumbo steers were the majority of hides available from some packers. Prices on packer steer hides are bunched around the $76 level with very little differential between selections. We saw some interest in the cow market in mid-week, but there were a few people who reported seeing a levelling off in this sector.
Tanners were stunned after the previous week’s price increases and will likely hold back for as long as they can. Meanwhile after several good weeks of sales, producers are sitting on great forward sales positions and will also be inclined to hold back. With reduced volume expected, there is speculation that a few producers might test the water and increase asking price.
Beef producers are adjusting their production down slightly as margins linger closer to break even. The sentiment among producers is generally bullish with most being fairly coy about what will be offered. One pundit commented that last week’s extremely high USDA reported sales will keep up pressure on the market this week.
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