US Perspective – 22.02.11
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
This week’s hide market started slowly but picked up as the week rolled on. It was a classic standoff. Buyers just back to work after the Lunar New Year holiday were shocked by higher prices and determined to roll back hide prices and reset the calendar at levels from two weeks back. Meanwhile, emboldened producers were not about to let that happen, expecting the positive momentum of the previous month to push prices past the $90 C&F threshold.
The results of this week’s standoff are not yet concluded, with mixed signals leaning towards a steady-to-firm market. Most reports show that the majority of hides were sold at steady levels – just under $90 – but some later sales indicate a number were sold over that price. Overall sales volume reported this week was down until the end of the week which had a normal number of trades reported.
Prices were mixed with most trades at last week’s levels; however, a few steer cowhides traded up a dollar. The increased trades included light HNS at $83 and BBS at $81. Increases on cow selections were mostly on the bottom side of their range and within last week’s trading levels.
Factors that suggest the potential for higher prices for cattle, and ultimately for beef, in 2011 and beyond, include reduced supplies of feeder cattle for placement later this year, high grain prices, dry conditions in the southern United States that could affect both pasture and crops later this year, high demand for domestic processing beef and increasing export demand for beef, in part due to a weak dollar.
There are many differing opinions on the hide market as it hovers in record-high territory. Clearly, some producers continue to bullish evidenced with offers this week that are a couple dollars higher than last. Sources note that HTS C&F China are being asked at $91.50 to $92.50 and bids for the same are $3 lower in some cases. Depending on whom you ask, some people are expecting prices to hold steady and some think they will increase at least a dollar.
Sources report that tanners have been able to get leather increases for March as much as $0.35 per square foot. Although this is a respectable number, these increases are only sufficient to cover hide prices in the $80 to $85 C&F price range. Now that prices exceed $90, tanners will have to ask for more money again. There is definite worry and talk of $95 hides.
Even packers have concern for the health of the industry at these high price levels. One major concern is the increased capital required to conduct business. This impacts everyone from traders to tanners by increasing the cost and risk of doing business. In addition, credit lines must be increased to accommodate the additional capital. This credit may not be available to all traders and tanners given tighter credit requirements of the banking industry following the financial crisis of 2009.
With a hot hide market in the US and other regions around the world, the wet blue split market is benefiting as leather users look for affordable substrates. Splits are moving very well with prices very firm. Prices for whole hide native, heavy splits are in the range of $0.65 to $0.70 per pound, C&F China. Medium and lighter weights are selling for $0.05 less while extra heavy splits from upholstery hides command from $05 to $0.10 more.
