US Perspective – 29.03.11
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
This week hide sales continued to be lower than the rate seen earlier in the year with the number of sales reported significantly under norms. Keep in mind that a lot of people are either travelling or in Asia for the APLF which can hamper communications. However, a number of people overseas have confirmed that there has not been a lot of business. Tanners though are still needing hides and showing interest—albeit at lower prices. One procurer commented: “I could sell all I wanted at one or two dollars down.” There were several sales for steer hides reported at $88, $88.50, and even $89, but overall trading was thin and most prices steady.
In the USDA export sales report for week ending March 17, sales of cattle hides and wet blue were down considerably from the year’s trend. For the week, combined hides and wet blue export sales are 519,400 compared to the 11-week year-to-date weekly average of 589,240. Shipments for the week were significantly higher than sales and the year’s trend. For week 11, combined shipments were 707,100 compared to the 11-week average of 600,574. For comparison, same week’s slaughter was 618,000, and this year’s average weekly slaughter is 639,400.
News from the US contingency now arriving in Asia has been slow and as yet, not much business consummated. While Japan’s tanning region was not affected by the tsunami, sources report that tanners are beginning to feel a decrease in leather demand as priorities from consumers shift to basic necessities such as food and water. Understandably, leather goods are taking a back seat as the country tries to recover.
According to Drovers/The Cattle Network, packer margins improved nearly $53 per head for the week ending March 19, climbing to $33.78 per head.
In the beginning of April, shippers are being hit with another round of freight increases resulting from fuel cost increases. Although the amount of freight increase varies depending on steamship companies, shipping routes, and destinations, most people are talking increases that amount to $0.40 to $0.50 per hide, with one or two as low as $0.25. This freight hike will place the total C&F up charge solidly in the $7 per hide price range. Leading into the latest round of freight increases, most people used as a rule of thumb $7 with some people claiming a little less and a number quite adamant that all inclusive freight, financing, and commission was at least $8 per hide.
The supply of cattle outside feedlots remains very current and the expectation is that feedlots will find it increasingly difficult to find feeder cattle at the rate they did in 2010. The decline in live cattle supplies points to even higher live cattle prices down the road which will keep pressure on packers to limit slaughter.
