US Perspective - 03.06.08
03/06/2008
The Jacobsen Commentary and Market Opinion—03.06.08
Courtesy of www.thejacobsen.com
Business in the US last week was not nearly as brisk as the week before; however, we have reports of a decent amount of interest. From our vantage point it appears as if packers won their battle with buyers last week, as we understand that bids from Chinese tanners for HTS which started the week at $72-$72.50 delivered were quickly improved to levels of $73-$73.50, and by the end of the week, most were of the opinion that there was a reasonable amount of business booked this way. Meanwhile, HNS remained steady at $67.50, while other steer selections saw HNDS bring as much as $67, BBS at $66 and CBS at $64.
In the meantime, the number of heifers in the mix is on the rise and packers are feeling the pressure as we have heard from a number of reliable sources that several of the packers are looking to do some volume type business very quietly with some of the larger tanners. Rumblings are that at least some of the packers would accept levels at low as $58 for HNH in volume, while rumors are swirling that packers might be willing to take as little as $55 for HBH in volume.
As for the cow trade, cow-calf operators are running 6–6.5 days a week as it is a very lucrative time to slaughter cows. However, the increased numbers have yet to put a dent in the prices of cows, with the exception of HBC.
Trading levels we have heard on HNDC are coming in as high as $58 depending on what part of the country you are in, while interest on HNC is hovering around the $53–$54 level. Meanwhile, the struggles surrounding the sales of HBC continue as we are hearing numerous reports of multiple sellers carrying larger than normal inventories of this selection. With reports that Brazilian wet-blue prices are becoming softer, this is not good news for producers.
In the meantime, interest on Bull Hides remains decent and this is holding prices steady, while interest on small packer hides is checking in at levels as high as $51-$52 this week. Meanwhile, interest on overweight provimi kips has still not returned to normal levels and this is resulting in kip prices somewhere close the $47–$48 level. The nation’s slaughter meanwhile checks in at 722,000 last week, which is the highest of the year as packers continue to register strong profits. However, this past Monday was a national holiday, so we will see the slaughter slip into the lower 600,000 levels this week.
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Cattle markets USA
Courtesy of AgCenter
Cattle owners sold cattle at $96 in the southern plains—a dollar higher than last week. Nebraska cattle traded a dollar higher at $150 in the beef. Volumes were only moderate as National Beef announced a reduction in its kill schedules owing to slow export markets.
Beef cuts edged lower at the week’s end. Box prices have demonstrated a very stable pattern for many weeks, finding a price level tooled for a slaughter rate of 700,000 cattle a week. Forward-bought beef as a percentage of total beef purchases is rising. This translates into a confidence in the market on the part of retailers. Restaurants also are booking forward sometimes for a year to protect from future price advances. Choice cuts remained at $155 and select at $152.
Feeder futures are struggling for price direction. Wars between commercial hedgers and speculative longs is being fought out daily and the winner has not been announced. Occupancy rates are in rapid decline in the nation’s feedyards and many feedyards are applying a mark-up to feed costs to cover overhead.
Sellers are actively seeking forward contracts for next fall when feeder supplies are expected to jump. Basis trades for late summer and fall are several dollars under the futures. A 750-pound feeder steer is currently selling at $110, well under the August feeder board.
Corn futures turned lower in late-week trading. Completion of planting combined with a slowing of demand will compete against low stocks and the possibility of a weather event this summer. Current quotes on the southern plains are 50 over the July contract. Corn is now pricing into most rations at $11.50 per hundredweight.
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