US Perspective - 24.05.11
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
This week the sentiment was a continuation of last Friday’s tone with packers and some traders fairly upbeat. While there have not been any offerings, a few people commented that they expect suppliers this week to ask up a dollar or be much tougher holding the line on their prices. Most prices on trades reported were steady with last week with the exceptions of packer BBS up a dollar at $84, bringing them close to par with HTS.
Cattle prices last week fell 1.6% to $113.17 but remain up 13.3% from a year ago. Meanwhile, choice cutouts fell 2.1% or $3.75 per hundredweight last week and remain 3.5% higher from a year ago.
Several processor cow trades were sold for down money, with the remainder of other sales at steady prices.
Slaughter this week is expected to remain lower than seasonal norms due to sluggish meat sales and lower margins. Last week’s USDA estimated kill was 653,000. Actual slaughter for the same period last year was 684,600.
The market has not yet demonstrated buyers are willing to follow any increases suppliers are asking for this week. Most buyers appear unconvinced that the market has firmed as evidenced by the big export sales reported last week. One tanner opined on the market, “If there was a bounce from the export sales report it is over and the hide market is at best steady.” Generally, interest has been slow with a few reports of some lower test bids in the range of $87 to $89 C&F China and some at the same level as last week.
Traditional blackout dates for shipments into Italy will be soon be upon shippers of hides and wet blue from the US and other countries. The Italian leather industry each year must take the month of August off for holiday vacations. Hide and wet blue suppliers must coordinate shipments so no containers arrive up two weeks before or during that period. For instance, one hide supplier indicated they could not have any arrivals in Italy between July 10 and August 28, making their blackout for shipments between June 6th and July 15th.
According to Drovers/The CattleNetwork, packer margins were steady to $1 per head lower for the week and held in negative territory for the fifth consecutive week at -$26.30 per head.
Following last week’s big splash of nearly a million hides for wet blue and hide sales, the report for week ending May 12 returned to more “normal” numbers with 560,990 whole hides and wet blue pieces. Combined exports for the week were close to the week’s sales at 567,400. Through week 19, the average weekly whole hide and wet blue sales total were 580,332 and average weekly shipments were 597,584. For comparison, last week’s slaughter was 653,000 and the year-to-date weekly average was 639,898.
The previous week’s huge numbers caused a bit of a stir in the trade last Thursday and Friday, but most of the hype had settled down earlier this week. If you take the past 10 ten weeks (including last week’s 941,000 total sales number) average sales are 560,850, which is under the year’s average number by 19,342 hides per week.
Wet blue sales for week 19 were 90,700, which is considerably less than the previous week’s 319,000. Through last week, average weekly wet blue sales are 132,919, which is very close to average sales this time last year of 131,037.
The hide market this week appeared to grudgingly hold with packers pushing hard to turn the declining market into modest increases. Buyers showed equal determination, looking for any bargains they could find, with price spreads on a number of hide selections increasing to their widest levels in a very long time. Harmony was not the best way to describe the mood of the hide market this week with many bids and offers far apart and a large number negotiations ending in stalemate.
Slaughter this week is estimated to be 654,000, slightly up from last week’s USDA estimated kill of 653,000. Actual slaughter for the same period last year was 684,600. Earlier in the week, the Urner Barry poll of industry participants guesstimated to be 658,391.
