US Perspective–25.01.11
25/01/2011
Courtesy of www.thejacobsen.com
The market’s momentum is carrying the recent wave of high prices forward. In this past week a decent amount of sales were made with prices continuing to inch higher. Both cow hides and steer hides climbed upward with BBS, HTS, and HNS plus NHNC and SHNC, all up a dollar on the high points of their trading range. BBS traded for $78 on the top and HTS and HNS at $79.
Last week sales and shipments reported in by the US Department of Agriculture for the week ending January 6 have both sales and shipment numbers up from the previous week, but lower than the week’s slaughter of 639,000. For the week, combined wet blue and whole hide sales reached 566,600 and shipments 461,000. Although both are solid numbers, their levels are under what would have been expected given the bullish tone in the market. Prior week’s combined sales and shipments were 316,281 and 476,100 respectively.
Earlier in the week the US hide market continued to hold firm with producers trying to edge prices to the $80 FOB level for steer hides. Buyers showed interest with bids at the previous week’s levels around $85 to $86 C&F on HTS/BBS, but were resistant to increases. The $80 price level for steer hides is a resistance point and an indicator of the market’s direction. In the middle part of the week the market was extremely quiet following the Martin Luther King, Jr. holiday on Monday, January 17. Sentiment continued to be bullish with most people expecting prices to remain steady or advance again in the course of the week.
Cattle slaughter in the US has dropped substantially over the past couple weeks and was expected to be low for last week. This extends the forward positions of hide suppliers without any new sales and for the time being, puts upward pressure on pricing. Reduced slaughter in other regions such as Argentina and Australia are also contributing to the bullish tone in the US hide market.
Slaughter is expected to continue at its lower levels with industry expectations at approximately 633,000 according to Urner Barry. Last week’s weekly kill was 628,000 and the same period last year it was at 669,000. Lower kills in the US combined with disrupted supplies in Australia will add to tightened supply and help keep the hide market firm.
According to Drovers and The Cattle Network, packer margins for the week ending January 15 improved $26 per head but remain in negative territory. The Sterling Beef Profit Tracker calculated average packer margins at -$7.45 per head. Last week packer margins were at -$33.06 and a month ago they were +$2.74.
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