US Perspective—06.12.11
06/12/2011
www.themaxfieldreport.com
Prices of big packer hides continued to drift lower last week in spite of the strong efforts of sellers to hold prices steady. Tanners, recognising some sellers did not possess the sold forward positions they had been advertising, took full advantage to buy hides cheaper last week. Overall, according to our Big Packer Hide Index, prices of big packer hides were down $1.85 last week and although members of the trade appear in agreement that current trading levels are more than affordable for tanners, the consensus of the trade is that it is unlikely packers liquidated their slaughter last week.
Meanwhile, the nation’s cow slaughter continues at a blistering pace with 159,000 head slaughtered last week and this large slaughter number will continue to keep pressure on producers to keep selling.
Now that we have entered the final month of the year, there are four weeks of trading left before we close the books on 2011, and two of these weeks will be interrupted by the Christmas and New Year holiday. In the meantime, sellers who have been struggling with an assortment of issues will now find themselves unable to ship to Asia by the end of the week. Meanwhile, unbeknownst to many industry pundits, for several weeks now packers have appeared “hell-bent” on slaughter at unseasonably large numbers in spite of margins that are running well into the red; this will not bode well for sellers who are struggling to secure timely letters of credit from buyers.
In the coming weeks we can expect to see a number of tanners around the world take some time off for the holiday. This, coupled with reports that the leather business for the majority of tanners is off somewhere close to a third, is likely to result in the vast majority of sellers continuing to feel the need to sell hides.
The unemployment rate dipped to 8.6% in November. However, that was mixed news as employers added 120,000 jobs during November, but 315,000 people gave up looking for a job. If the economy is able to sustain growth and pull the unemployment level down, pundits are of the opinion meat demand will almost certainly improve, pushing beef and cattle prices to new record highs.
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