US Perspective - 19.06.12
19/06/2012
At the end of the day, efforts by packers to keep a “9” as the first number on steers feel by the way side, as by the end of the week, it appeared finding volume type bids at levels of $89 delivered to China was no easy task. The good news for packers is that with sales late in the week of June 4th coupled with trading last week, we look for another strong US Department of Agriculture Export Report this coming Thursday and will mark the third consecutive week of strong sales. Meanwhile, reports from the cowhide trade claim most producers saw a busy week of trading. Overall, volumes traded last week appear mixed depending on the source; and it is widely agreed if sellers were willing to trade at levels $2-$3 under their asking prices, they could have sold substantial volumes. In the meantime, another worry for sellers is the fact we saw one of the largest cow slaughters for the calendar year last week (138,000 head) attributed to drier than normal conditions over much of the South, Southern Plains, and Midwest and pundits are of the opinion this week’s slaughter is likely to be large again. We are coming across a few more members of the trade who are of the opinion that there might be a few more cows for sale than sellers are willing to admit. This, coupled with perceptions there are plenty of cows for sale in Europe and reports that sales of wet-blue hides in Brazil are lacklustre, has some pundits leaning towards the opinion sellers of cow hides in the US may have their work cut out moving forward.
As to what we expect this week, it will certainly be interesting to see how packers price their hides. It was no secret by lunchtime on Friday that some of the packers were willing sellers of HTS and BBS at levels of $82 (FOB) against asking prices that started the week as high as $86 (FOB). In the meantime, although it appears as if there was a decent number of hides exchanging hands last week, we doubt packers will have much time to rest on their laurels. This week’s slaughter is likely to challenge the highest levels of the year, especially with packers buying live cattle for less money last week while holding box prices close to steady.
In the meantime, we are approaching the Dog Days of Summer, which historically is a slow demand time for tanners as they are between seasons. The good news for packers is that the perception of the trade is that none is believed to be carrying large unsold inventories. However, with slaughter levels running close to 660,000 head on a weekly basis, it only takes a couple of weeks of sluggish sales against such large slaughter numbers to see sellers succumb to the weight of their inventories. Meanwhile, it will also be important to monitor the situation in Europe, from not only a financial and economic standpoint, but also those selling hides. Popular opinion of the trade is there are still a number of sellers who are carrying large unsold inventories of hides and with summer holidays just around the corner, we tend to suspect there will be some pressure on those sellers to liquidate their unsold inventories.
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