US Perspective—22.07.08
22/07/2008
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
Prices of big packer items continue to defy the rest of the global market and reflect yet another incremental increase that took place this past week.
The increase appeared to be roughly 50 cents across the board on most of the steer selections; however, worth noting is the fact that prices of big packer heifer hides have barely moved during the recent four- or five-week run-up in steer prices. This has some members of the trade commenting that a $10 differential between steers and heifers could generate some interest from tanners; however, as of this writing, we cannot confirm any substantial trading on heifer hides.
Trading levels on big packer steer hides have seen HNS and HTS on a par with one another as we have confirmed trading levels at $75–$75.50 delivered which would work back to $69 for most and possibly $69.50 from a favorable origin. Meanwhile, BS are still easily able to bring levels of $74 delivered ($68 FOB) while they appear on par with BBS which also have brought $68, with rumors that even $69 has been paid.
Meanwhile, the cow and bull market remains in the doldrums and one does not have to look very far or hard to find those who remain fairly pessimistic about this market. Reports we have encountered are saying that the ailing furniture and automotive upholstery business is taking its toll on HNDC and HNC as we have reports on dairies as low as $54 this week, while reports on HNC have finally slipped below the $50 level, this week checking in at $49.
In the meantime, the well documented problems surrounding HBC are not going away and we have heard speculation by some pundits in the trade things could get even worse here before we see things improve. As of this writing, we have not heard of any seller accepting anything less than $40 for HBC; however, there is speculation if sellers were to sell in volume this week they would have to consider at least a couple of dollars lower than this. Bulls are no picnic either as the problems in the upholstery trade and recent earthquake in Chengdu has all but stopped interest in Bulls. Trading this week are indicating Natives have finally fallen below the $60 level and we have trading at $57–$58, while Brands are checking in around $51–$52.
In the meantime, the nation’s meatpackers are ringing up some rather lofty profits with some sources quoting margins are easily better than $70 per head the last several weeks. However, reports are citing that after this month, supplies of live cattle should tighten and we will have to see how true these reports are and—if correct—if packers will want to reduce volumes in order to maintain their margins.
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