Why the weak dollar is good news for US meat suppliers
02/10/2007
The US big packer market remains conflicted as there are several different opinions as well as “trading stories” running through our market.
Overall, it appears the general sentiment of the trade is that US big packer prices are lower once again this week, but finding anyone who will “step up to the plate” and confirm they have sold or bought at lower levels is difficult. During the week commencing September 17 we saw us prices slip by between 25 and 50 cents a hide, while this past week, the commencing September 24, prices may have fallen by another 50 cents, if not $1, pretty much across the board.
Meanwhile, we continue to hear plenty of negative stories surrounding HNS as speculation remains that more than one of the producers have large amounts on this selection in inventory unsold. Some producers are still insisting they can sell at levels as high as $68 FOB, but we have our doubts that there is any volume attached.
As far as the other selections, HTS appear as if they are no better than $66 FOB, and many members of the trade here insist they are really no better than $65. Other steer selections are facing similar problems.
As it relates to cows and bull hides, HNDC and bulls still to be the winners; we cannot attest to any producers who are willing to negotiate their asking prices on these selections, while HNC, which had been holding steady for the last few weeks, might be starting to show signs of succumbing to some pressure. We have heard rumors some trading has been accepted at fifty cents lower this week.
HBC continue to be a problematic selection as it appears producers are struggling to liquidate their production. Small packer hides are trading at slightly lower levels; trading levels are reported in the low $50s. Interest on kips has slowed considerably as sellers are saying that buyers’ ideas are roughly $3-$4 lower than their last trading level at $54-$55.
Big Packer Hide Prices
HTS 62/64 @ $65.50
BS 62/64 @ $64.00
HNS 62/64 @ $66.50
Cow / Bull Prices
N HNDC 50/52 @ $59.00
N HBC 50/52 @ $44.00
N BULLS 105/115 @ $62.00
**All prices are cured, fleshed and trimmed – FOB plant**
CATTLE MARKETS USA
The loss of value in the US dollar is positive for the domestic beef industry. It makes imports of beef from other countries more expensive and it makes our beef more attractively priced for export.
Look for improved demand for our beef from abroad.
Cooler weather will stimulate demand for beef. Retailers will struggle to hold the lid on prices as packers firm up asking prices. Traders will keep an eye on the slaughter level and most packers are paring back slaughter schedules. The choice cut ended the week down $1 at $146.40 on Friday. The choice/select spread was at $9.
Feeder cattle prices levelled out and feedlots will be watching corn for price signals for replacement cattle. Buyers will exercise caution on inventorying calves as stocker operators assess the winter wheat grazing availability. Placements of feeder cattle into feedyards are increasing and are now exceeding levels of last year. October may show an expanded placement pattern after several months of decline.
Most bids in the southern plains were $116 on 750-pound (340 kilo) steers. Basis bids by feedlots are negative to the board prices.
USDA crop inventories and ending stocks jumped by 150 million bushels to 1.3 billion bushels, well over the trade estimates. Corn prices tumbled on Friday on this news. Wheat stocks are low and prices are expected to rise well above the current record levels.
The reality of an inadequate acreage base to support all grains, is evident in the pricing of wheat and soybeans. Acreage set to corn last spring came out of cotton or soybeans or wheat.
Defined needs of all of those grains has caused volatile prices many competing crops are not pulling acreage back from corn to wheat and soybeans. The closely watched December contract moved around $3.80/bushel. Basis quotes are .45 over the December contract. Harvest is moving into the Texas Panhandle and elevators are planning to fill all available storage.
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