US Perspective–15.02.11
15/02/2011
Courtesy of www.thejacobsen.com
The US hide market this week ran into resistance which led some buyers to walk away from increased offerings and resulted in lower volume. There were a number of sales made for higher prices including HNS, HTS, BS, CBS, and Bulls, but a number of selections traded within last week’s price ranges. Several sales for steer hides, C&F China were reported, including $88 to $88.50 for BS and $89 for HTS.
There were a few Chinese tanners who needed hides for March/April back in the market. One source noted that some major tanners were buying in fairly decent volumes this past week. Most people expect this coming week to see more buyers back in the market as the majority of Asian tanners return from the Lunar New Year holiday.
The market picked up as buyers returned with interest in a number of selections. Several producers noted that the air seems to becoming thinner with more push-back from buyers, but there are enough people buying hand-to-mouth to keep forward positions comfortable. Consequently, the market remains very firm.
With most of Asia’s tanners on holiday at the end of January and beginning of February, the hide and blue markets were considerably quieter than previous weeks. In the USDA export sales reports for week ending February 3, sales for combined hides and wet blue were 440,000 pieces and shipments were 591,000. The week before that, the same report showed combined sales at 706,300 and shipments of 684,700. With much of the Midwestern US blanketed with snow storms, slaughter ended at 624,000.
This year’s average sales and shipments for hides and wet blue are 624,152 and 605,260 respectively compared to slaughter of 636,732. Assuming domestic usage of 30,000 hides per week, it appears that sales are ahead of the hide supply and shipments are keeping pace.
Over the past quarter, as the firm hide market has increased to near historic highs, the spread between cowhides and steer hides has finally begun to narrow, but has not returned to normal levels. From 2000 to 2008, typical spreads between NBC and HTS hovered around $20. Following the market crash of 2009, that gap widened to around $35 and has held until recently. Trades over the past couple weeks for cows above $50 and HTS above $80 have closed the gap to between $25 and $30.
The plump cow hide market has lagged largely because the housing and furniture markets have not performed or recovered from the recession as quickly or well as the footwear, bags and automotive industries. As prices continue to push upward and tanners are squeezed, there is more interest in cheaper alternatives. With the difference between the cheaper branded cows and steer hides closer but not yet at the normal spread of the past decade, we will likely see this narrow further as prices on steer hides increase.
According to The Sterling Beef Profit Tracker, for the week ending February 5, average packer margins dropped $7 per head to $51.07.
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