US Perspective–01.02.11
01/02/2011
The market remained firm at the end of the week with a moderate number of sales reported. Several people noted that the week ended fairly flat, but one said that interest picked up towards the end. Prices on steer hides were steady and within the week’s trading ranges, with the exception of heavy CBS up $2 averaging $74, and kips up $1 at $67. One producer said there was more interest in cows than steer hides this week.
The US Department of Agriculture (USDA) estimate for week-ending slaughter is 650,000, up 20,000 from the same period last week and up 19,000 from the same period last year. This higher-than-expected number is probably due to packer margins climbing into positive territory for the first time this year. Packer margins were reported at $28.18 for the week ending January 22. Earlier in the week, participants in the Urner Barry poll guesstimated average slaughter to be 633,913.
Here are the designated public holidays for major Asian countries associated with the hide industry celebrating the 2011 Lunar New Year.
China: Thursday, February 3, 2011 – Saturday, February 5, 2011 (three days)
Hong Kong: Thursday, February 3, 2011 – Saturday, February 5, 2011 ( three days)
South Korea: Thursday, February 3, 2011 – Saturday, February 5, 2011 ( three days)
Taiwan: Wednesday, February 2, 2011 – Saturday, February 5, 2011 (four days)
Vietnam: Wednesday, February 2, 2011 – Saturday, February 5, 2011 (four days)
Both native and branded heifers were traded higher at $73 on their upper end. Packer butts sold between $79 and $79.50. Two trades sure to catch tanners’ attention, were a sale of packer branded steer hides for $81 and packer Northern branded cows for $48.
For week ending January 20, USDA reported whole hide and wet blue total sales were extremely large with 826,764 totals for the week. Cured hides alone were 611,000 pieces, just under the week’s slaughter of 628,000. Shipments for the week also exceeded slaughter with a combined wet blue and whole hides total of 727,100 pieces.
See below the three-years-to-date comparison for slaughter to hide and wet blue shipments and sales through week three. This year appears to be starting significantly ahead of both 2009 and 2010 for sales and shipments. Sales in the first three weeks are up by 5% from 2009 and 43% from 2010. Shipments meanwhile are 5.2% higher than 2009 and 8.45% higher than 2010. Year-to-date average combined blue and hide sales are 658,000, and shipments 583,500 pieces.
For 2009, slaughter, sales and shipments were 1,868,229; 1,879,300 and 1,664,300. For 2010, the corresponding figures were 1,972,359; 1,376,200 and 1,614,200. The figures for 2011 are 1,897,512; 1,974,464 and 1,750,600
As with other commodities, hide markets continue to be firm with prices edging upward. Most people in the trade are of the opinion that the market shows little sign of backing off. This is reflected in some offers with higher asking prices than the previous week’s levels. In general, offers have been limited with heavy or jumbo steers more plentiful than medium weights. One packer commented today that when they offered any light steers they were sold by Wednesday.
With leather business?particularly for automobiles and shoes?doing well, tanners continue to live a bit from hand to mouth. This low inventory pipeline, unfortunately for the tanners, is working against them on pricing since they must buy steadily and often.
Last year’s federally inspected cattle slaughter increased by 2.87% from the previous year to 33.702 million. Industry pundits had not predicted growth in kills for 2010, but favourable market conditions prompted by the weaker dollar and strong export sales prevailed.
The distribution of the year’s kills saw a disproportionate increase in breeder cows and bulls compared to other selections. In 2010, steer slaughter was 33.7 million, up 2.86% from 2009. Heifers at 10.05 million saw a 1.7% increase. Dairy cow slaughter was 2.8 million, down 0.28% from 2009 due mostly to the discontinuation of the dairy herd reduction program. Meanwhile at 3.63 million head, beef cows had a 9.17% slaughter increase from 2009. Bulls at 6.22 million had a 9.12% increase.
Commercial cow slaughter maintained a high pace during all of 2010. Cow slaughter each quarter was the largest in well over a decade (fourth quarter of 2010 estimated), as was the annual total cow slaughter. And this slaughter was based on the smallest US cow herd at January 1, 2010 since 1951’s total cow inventory of 39.4 million cows, which means a relatively high culling rate, even after adjusting for imports of Canadian slaughter cows. The high rates of cow slaughter were supported by high cow prices during most of the year. Despite the relatively high cow slaughter numbers, anecdotal comments suggest some heifer retention for cow herd building may have begun.
A speculative thought is that some pre-baby boomers, and some early baby boomers past or nearing retirement age, may be getting out of the cow-calf business. This does not necessarily mean the cows of those owners will all go to slaughter; they may simply change hands, consistent with the trend toward fewer cow herds. Interestingly, agricultural census data show only a slight increase in the average number of beef cows per beef cow operation since 1992.
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