US Perspective - 14.06.11
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
The stock market has been retreating for five consecutive weeks, undeniably influenced by a faltering economy. Surprisingly, this has not yet had much impact on the hide markets. A few people have been speculating that the slowing economy will eventually spill over into the hide market, but producers have not received the memo and for the moment, remain quite upbeat.
Cattle prices last week were down with live fed steer prices off 0.026% at $104.85 per hundredweight. The average live weight was 1,251 pounds, down five pounds from the prior week and down seven pounds from last year. Meanwhile beef cutout prices decreased 0.25% to $177.74 per hundredweight and the hide offal dropped 0.73% to $13.51 per hundredweight. Compared to the time last year, current live cattle prices are up 10.92%, beef cutout is up 9.39%, and hide/offal is up 29.41%.
Coming off a good week’s sales, several producers and traders maintain their positions are positive and will be looking at least for steady money. It is no surprise that buyers’ ideas remain quite different.
Suppliers reported interest for steer hides at levels down slightly from last week with bids between $88.50 and $91. A couple of people commented that buyers were holding back, believing the market may turn lower if kill numbers increase significantly.
Packer margins continue to be strong with pundits estimating another big week. The Sterling Profit Tracker estimates packer margins for week ending June 4 at $107.85 which is up $27.89 from the previous week. With packers making money, industry participants are expecting kills to be up with some now guessing we may see near 700,000 soon.
USDA Export Sales Review
Combined wet blue and hide export sales for week ending June 2 was 452,600 pieces. Through the year’s 22nd week, average weekly total sales are 581,694—exceeding last week’s average by 129,094 pieces. The week’s sales were less than many had estimated which perhaps gives some indication as to the slower activity in the hide market this week.
Shipments of hides and wet blue were considerably higher at 612,700. This is slightly above YTD average shipments 595,536.
For comparison, last week’s slaughter was 617,000, which was lower due to the Memorial Day holiday. Year-to-date weekly average for slaughter in 2011 is 641,519 and in 2010 it was 642,630.
Wet blue sales last week were 58,200 pieces, falling considerably from the previous week’s 202,400. Year-to-date average weekly wet blue sales are 130,989; and it appears evident that the major swings in blue sales volume are likely attributed to monthly program sales. Wet blue sales this year are trending below last year at this time by 5,447 hides weekly.
