US Perspective–28.06.11
28/06/2011
Courtesy of www.thejacobsen.com
The hide market last week was unremarkable with producers able to advantage favourable forward sales positions and hold prices in spite of strong resistance from buyers and tons of dismal economic fallout. On the world stage, the European financial crisis is the gift that keeps on giving as The European Union and International Monetary Fund struggle to contain Greece’s insolvency. In the energy sector, the International Energy Agency agreed to release 60 million barrels of oil over the next 30 days to offset the lost oil production caused by the Libyan civil war.
This week’s USDA export sale report was over 750,000 hides and blue for the second consecutive week, with over 214,000 wet blue sales. It is interesting that these substantial export numbers were shrugged off by most people and even the most ardent bulls were careful to understate their significance. For instance, regarding the wet blue numbers, one supplier said: “With over 200,000 hide blue capacity in the US, having over 200,000 wet blue sales one week should not be any surprise.” Wet blue production capacity in the US is indeed greater than we have been seeing with the weekly export sales each week. Our year-to-date average weekly export sales are just over 136,000 and sales patterns have been quite sporadic this year. With the Italians soon going on their summer vacations, it is likely before shipments are stopped this year, producers are motivated to move as much material as possible. Last week Italy had the second largest share of wet blue export sales at 57,000.
Slaughter for last week is estimated to be 684,000, down slightly from the previous week’s 688,000, but up from the same period last year when it was 668,419. Some pundits are thinking the previous week’s 688,000 may be the highest kill for the year. Recent sharp increases in live cattle prices and the subsequent erosion of packer margins will likely put a damper on kills and prevent slaughter from reaching the 700,000 level.
Combined wet blue and hide export sales for week ending June 16 were 750,500, nearly the same as the previous week’s 751,600. This is the second consecutive week that the average weekly total sales are substantially above the yearly average of 595,807. Once again, the large number brings to light the firmer tone we are seeing in the hide market as producers capitalise on favourable forward-sold positions.
Shipments of hides and wet blue at 647,900 were under sales but considerable above year-to-date average shipments of 596,254. For comparison, the previous week’s slaughter was 688,000 and the 2011 year-to-date weekly average is 645,048. The 2010 year-to-date weekly average was 644,347.
Wet blue sales the previous week were 214,500 pieces; an increase from 170,200 the week before and substantially greater than this year’s year-to- date average weekly wet blue sales of 136,102. For the first time this year, wet blue sales are trending above average weekly sales for the same period last year when they were 131, 904.
Below is the year-to-date comparison of wet blue and hide sales, shipments with cattle slaughter through June 16.
The figures for slaughter, sales and shipments for 2009 were 15,199,123; 16,474,300, and 15,391,000 respectively. For 2010, they were 15,464,322; 13,551,795, and 14,139,700. The corresponding numbers for 2011 are 15,481,149; 14,299,367, and 14,310,100.
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