WEEK IN REVIEW

Dull might be the most succinct word to best describe the pace of trading this week. Offering prices were typically steady with previous sales as were what relatively little business that was accomplished. Steer demand cooled considerably from the torrid pace seen earlier in the month, and cows remained in the doldrums.

Texas steady

Major packers were not bashful with asking prices this week, with offers seen at $70.00 in several cases. One large producer didn’t even offer seasonal weight material. Regardless, buyers were less than enthusiastic and few will argue with the observation that considerably more heavy Texas steers were produced than sold.

Most bids were seen at $67.00 and $68.00 which were rejected. The highest price heard was at $69.00 but only in small quantities. What trading that did occur was at $68.00. On a c&f basis the highest prices reported were at $76.50 while bids at $75.50 were promptly passed by sellers.

Branded steers steady

Interest was also less than stellar in branded steers with volume limited. Sales were posted on the low end at $67.00 for packer material and up to $68.00 for the most desirable origins. Offerings for early fall shipment were mostly on 62/64 lb. averages.

Western Canadians sold at $68.50 on averages between 65 and 70 lbs. while other bids at $68.00 were countered at $69.00. On a c&f basis, bids at $73.50 were countered at $75.50 and passed by buyers. Colorado’s traded at $65.00. 

Butts steady

Demand was lackluster as on other steer productions but prices held. Prices were more in line with branded steers than with Texas. Sales were reported at $68.00 on the top end but another trade or two took place between $67.00 and $67.50. On a c&f basis, one sale was posted at $75.00

Heavy natives firm in short supply

The usual program trading of heavy native steers saw steady prices but tanners who needed additional quantities for closer in shipment were squeezed by packers to $69.50 and an unconfirmed report was heard as high as $70.00.  Regardless, most business was done at $69.00, steady with last week for the same material. Lesser qualities or those with longer freight that sold at $68.00 and $68.50 which was steady with a week ago.

Heifers barely steady

Natives that had been able to garner $60.00 previously had trouble finding buyers at $58.00 and $59.00 this week and seemed to be offered in greater quantity than usual. Some sales of better productions sold at $58.50 and $59.00. Other offerings remained available this afternoon.

In brands, lack luster interest was apparent. A few sales were posted at $56.50 from river areas and one packer said they traded at $57.00. As in the case of steers, more seemed to be produced week than were sold

Cows pressed to find bids

The cow market continued under pressure for still another week as forward sold positions eroded further. More prevalent brands were readily available as low as $40.00-$41.00 in the west and southwest with what few bids seen in the area of $1.00-$2.00 lower. Most sellers held out for prices closer to their asking levels, which turned out to result in very few branded cows changing hands.

Heavy natives faced the same lack of demand. A few sales were recorded between $49.00 and $51.00 depending on origin and average

Dairy cows weakly dull

We heard of more shipping problems by tanners reluctant to open lc’s against previous higher priced orders, than we did of new business. The only confirmed sale posted was at $56.50, down from $57.00 a week ago. Holstein steer demand remained solid, on limited offerings with prices heard in Asia as high as $83.00-$85.00 c&f

Skins

Provomi kip met with little buyer interest as well this week. One sale was said to have occurred at $48.00 for 25/35’s but could not be confirmed. Pigs and sows remained strong

Bulls weak

Bull buyers were few. Most of what were offered on Tuesday remained available for sale today. Natives were bid in one case at $57.00 and countered at $60.00. Heavy average brands were offered at $59.00 from a close freight point and did not sell. Naives with some Holstein content were offered at $61.00. One sale of natives took place at $60.00 on 95/105 lb. averages.

Small Packers steady

Conventional brands were bid at $50.00 on averages between 74 and 76 lbs. and countered by the seller. Fleshed native steer/heifers traded at $50.00 - $51.00 c&f. on 48/50 lb. averages. Native steer/heifers were bid at $58.00 c&f and countered.

Low Grades

Buyer nonchalance was obvious as offerings found less than active response from tanners. Processor thirds were bid at $42.00 on lighter averages. Machine damaged 3’s were offered at $51.00 on seasonal averages. Conventional diary renderer 3’s were bid at $30.00 c&f and countered at $34.00. Fleshed hair slip dairy processor thirds were available at $35.00

INDUSTRY NEWS

More red tape for hide shipments

APL sent a notice to shippers this week saying that “U.S. Customs & Border Protection (CBP) will begin enforcing the new AES Rule, effective September 30th 2008. This will require significant changes to the shipment processes for all cargo on vessels that load at ports in the United States. Shippers are required to provide their ocean carrier partners either the ITN number provided in response to their AES filing with US Census or written notification of their exemption /exclusion status. This will need to be provided on a per Bill of Lading basis.

Shippers or their forwarders will need to review their supply chain processes with their sourcing locations and suppliers to ensure that they provide the ITN information to their Ocean Carriers significantly earlier in the shipment process to meet these information cutoff requirements. Shippers will face a new 'ITN cut-off' well in advance of our current vessel cut-offs. APL must be provided either the ITN number generated as a result of their AES filing with US Census or written notification of their exemption /exclusion status as of this new cut-off. Otherwise CBP will prevent loading the shipment.

Delays at So California ports

Earlier this week, the Ports of Los Angeles and Long Beach were hit by “coordinated coffee breaks.” Typically, individuals take breaks while port operations continue uninterrupted. But this week, all longshoremen at a terminal have periodically taken their breaks simultaneously. This caused periodic cessation of operations. It was hoped that the new West Coast Longshoremen contract negotiations would go smoothly and a new contract completed by July 1. This has not happened yet, and a temporary extension of the old contract was not adopted, so work continues on a day-by-day basis. .

California container fees

The so-called Lowenthal container fee is moving through the California legislature and will likely be signed by the Governor. It imposes $30/TEU on containers moving through L.A., Long Beach and Oakland. Part of the Lowenthal fee is directed to unspecified environmental and health mitigation

Fewer hides in the future

USDA's Economic Research Service issued its monthly Livestock, Dairy and Poultry Outlook today. Details can be seen below in our Slaughter section. The USDA confirmed continued liquidation of the U.S. beef cow herd. USDA's mid-year Cattle Inventory on July 25th showed a 1% year-over-year decline in the U.S. beef cow herd, as economically challenged ranchers continue to slowly sell-off their stock in the face of prohibitive fuel and feed costs.

The report said that the U.S. total cattle and calf herd is shrinking. The dairy cow herd is still above a year ago. The beef cow herd is shrinking. The Canadian cow herd is shrinking; Extrapolated around the world, the Australian cow herd is shrinking. The South American cow herds on aggregate are shrinking and the European cow herd is shrinking, so this is not just a domestic phenomenon."

Chinese pig production increases

China's live pig production has picked up rapidly despite of feed price hike and consequence of natural disasters in Southwest China earlier this year, according to China's Ministry of Agriculture (MOA). A survey by MOA of 1,800 scaled farms and 1,800 private farms in 20 pig-raising provinces shows that the number of pigs in stock by the end of June was up 10.6% year on year, and pigs slaughtered were up 4.8%, according to the Chinese news agency Xinhua. Given this information, we can’t help but wonder why the pig skin market is so strong. 

La Crosse Footwear numbers up

LaCrosse Footwear posted second-quarter increases in both sales and earnings yesterday. Earnings for the three months ended June 28 were up 47% at $1.4 million, versus $976,000, the prior year. Net revenues were $27.8 million, an increase of 12%. Sales to the outdoor market slipped to $10.5 million from $11.8 million last year.

Rocky Brands posts gains

Rocky Brands announced earnings this week of $0.7m profit in their second quarter. That compared with a $1.4m loss in the same period last year, with sales up 2.9% to $60.5m. Wholesale revenues edged up slightly to $42.5m, while retail sales were down marginally at $16.2m. Military sales were $1.8m, compared to $0.3m a year ago.

EXPORTS

Raw hide export sales up

Net raw hides export sales for the period ending July 17 totaled 512,500. This was 36% above last week and 12% over the previous four week average. Destinations were:

Weekly exports against previous sales totaled 409,700. This was down 19% from last week and 27% below the previous four week average. Outstanding still to be shipped raw hides totaled 5,787,700.This is up from last weeks 5,686,500 but below the total of 5,824,000 two weeks ago.

Higher wet blue sales

Net sales of wet blue hides for the period were 97,900 pieces. This was over three times last week and 2% above the previous four week average. Destinations were

Export shipments for the period were 105,000. This was 13% over last week but 20% below the previous four week average. Outstanding contracts still to be shipped totaled 543,500 wet blue hides. Last week 550,700 were outstanding and two weeks ago, 611,500

Combined raw and wet blue outstanding

The combined raw and wet blue outstanding total for the period ending July 15^th was 6,331,200 pieces. This is up from 6,237,200 last week but under the total of 6,435,500 pieces the week before.

Wet blue split sales

Net export sales of wet blue splits totaled 128,900 lbs. The only destination was China. Weekly exports against previous sales were 487,900 lbs. This was 8% over last week but 58% under the previous four week average. Outstanding split sales totaled 4,691,700 lbs. Last weeks total was 5,050,700 lbs. and two weeks ago, 4,452,700 lbs.

FORECAST.

Our prediction in last weeks issue for steady steer and lower cow prices came to pass this week. Well forward large producers were not pressed to sell and could afford to pass lower bids, even if they were not plentiful. Cow producers might have taken lower prices, but bids were hard to find, and then typically in only limited quantities.

For the coming week, while the market may manage to hold steady, we have our doubts at least at current prices. For this reason, and considering the Friday Afternoon Factor below, we have tilted the scale to the left. This means that in our view, supply exceeds tanners need to buy – albeit, at prices that sellers are demanding.

6.20.08

6.27.08

7.4.08

7.11.08

7.18.08

FRIDAY AFTERNOON FACTOR

Again this week, with few exceptions such as heavy native steers and one packer’s production of certain Texas and branded steers, there are ample quantities available – at a price. As noted above, cows are more than plentiful. Small packers are less than abundant but bulls especially, and to a lesser degree, low grades supplies are ample. A bearish bias based on supply has to be our conclusion

Looking ahead

The statistics reported by the USDA this week forecast a trend of decreasing supply. By the same token, as exemplified especially by China, as long as leather remains in fashion, demand should increase. This portends higher hide prices somewhere down the road. 

In the short term however, prices certainly have a softer undertone not only in this country, but as can be seen in our Latin American and European hide reports.

What’s this mean to near term hide prices? Perhaps not much, but when viewing the outstanding sales chart and number above in our Export section, it is easy to see the trend where producers, processors and traders extremely well forward sales positions are gradually eroding.

Combining this with tanner demand which is normally less in the second half of the year than the first, and the economy, and considering the factor that many tanners are adequately stocked for quite sometime, we will be surprised if prices don’t fall by late September and October. If we’re right, this would put benchmark fob Texas in the area of $65.00-$67.00 as fall begins.

SLAUGHTER

Federally inspected slaughter for the week ending Saturday, July 19 is estimated at 686,000 head. Last week’s total was 697,000. A year ago, the FIS was 682,000 head. For the year to date, slaughter is 1.1% over the same period 2007.

Cattle on feed down 4%

Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.3 million head on July 1, 2008. The inventory was 4%percent below July 1, 2007 and 5% below July 1, 2006.

The inventory included 6.43 million steers and steer calves, down 5% from the previous year. This group accounted for 62% of the total inventory. Heifers and heifer calves accounted for 3.82% million head, down 3% from 2007.

Placements in feedlots during June totaled 1.51 million, 9% below 2007 and 22% below 2006. Net placements were 1.45 million head.

Marketing’s of fed cattle during June totaled 1.97 million, 8% below 2007 and 10% below 2006. This is the lowest fed cattle marketing’s for the month of June since the series began in 1996