US Perspective - 17.05.11
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
The US hide market last week continued to be under pressure with prices down around $2 from the previous week. Steer selections had prices bunched closely with the majority of packer hides selling for $90 C&F. Some people said they were able to move fairly decent volumes but business was somewhat spotty between suppliers. Cow hides also sold for less, although some of the premium sources were able to hold prices better than others did. It might be wishful thinking, but most people thought enough volume was sold to hold prices this week. For the week, the Jacobsen Hide Index fell 2.49% with the weekly average of $81.88. In the past four weeks, HNS have dropped $7 or $7.7% from $90 to $83. A year ago, native steer prices were $73 which makes today’s market still ahead by over 27%.
Other commodities last week also saw significant declines including grains, metals, and oil. Omaha corn sold for $7 per bushel, down 1.62% and Iowa soybeans sold for $13.60, down 1.66% from the prior week. Although last week’s prices declined prices are still much better than last year with corn still up 96% and soybeans 43.5% from a year ago. Live fed steer prices last week were $115.09 per hundredweight, down 1.5% from the previous week but 15.6% higher than a year ago. Beef cutout values were $180.28 per hundredweight for 600 to 750 pound (choice), which was down 2.3% from the previous week, but up 5.6% from a year ago.
Buyers are continuing to push for lower prices. A number of bids for HTS/HNS have been made in the range of $88 C&F Asian port which translates to $80 dollars FOB. This price is a couple dollars under the level most volume was done last week. Suppliers are looking to hold prices and only a few offers have gone out with prices similar to last week’s selling ranges.
Sources report some product from Hong Kong has been re-sold and diverted as a result of the ongoing custom’s issues.
The US hide market is attempting to establish its footing with buyers continuing to look for reduced prices and suppliers determined to hold off further declines.
Packer margins for the week ending May 7 declined about $10 per head to -$25.19 according to Drovers/The CattleNetwork. This was the fourth consecutive week of negative margins. Negative margins will likely result in lower-than-normal kills, which may help packers resolve to hold tight on hide prices this week.
Overall, the tone among suppliers was a bit more upbeat than in past weeks, with considerable interest at lower price levels.
The USDA export sales report for week ending May 5th confirms record weekly hide and blue sales for this year. Both hides and wet blue sales were marketing year highs with 621,913 whole hides and 319,013 wet blue pieces for a total week’s sales report of 941,013. The combined sales for the week exceed the year-to-date trends of an average 581,401 pieces per week. For comparison, this year’s average weekly whole hide sales through week 18 are 446,146 and the wet blue average is 135,258. Last week was the first week in the past 10 that combined sales exceeded the average weekly trend.
Several people commented that they were not surprised that these numbers were higher since a number of producers had reported very good business during that period. Over the past week, a number of lower bids have been turned down which can be attributed to positive forward-sold positions which last week’s sales contributed to.
It is too early to know if the hide market has formed a new trading range, but a levelling off of prices and some semblance of stability would not be a bad thing. Current hide prices, which are $5 to $7 below their peak levels of a month ago, help lower tanners’ cost of manufacturing from $0.11 to $0.15 per square foot. At the same time, $83 to $85 FOB prices for steer hides are not too bad from an historic perspective.
Slaughter this week is estimated to be 653,000, slightly down from last week’s USDA estimated kill of 657,000. Actual slaughter for the same period last year was 677,782.
