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US Hide Market Activity Picked Up a Notch

Posted on Feb 16, 2017 in Hide & Leather

The US hide market activity picked up a notch, but most sales are still pending. The balance of offerings overnight was steady-to-slightly higher and a fair number of hides and wet blue seem obtainable; however, producers still uphold they have respectable forward positions.

Today’s Market

There was a moderate number of sales reported today with prices from steady to firm and increases for HBH and HTS.


Today’s Trades

Packer Sales

HNS 64 MIN @ $77.00 OR 0.9375
HTS 64/66 @ $73.75
HBH 52/54 @ $59.00 OR 0.8675
HBH 54/56 @ $55.50 OR 0.7875

Processor Sales

HNS 64 MIN @ $73.00 OR 0.8900
HTS 64 MIN @ $69.00
BBS 62/64 @ $72.25 OR 0.8950
BBS 60 MIN @ $70.00 OR 0.9100
CBS 60 MIN @ $59.00 OR 0.7675
CBS 64 MIN @ $62.00 OR 0.7550
HBH 52 MIN @ $51.00 OR 0.7650


Hide Market Trends

Price trends for the Jacobsen HTS and the US Bureau of Labor Statistics Producer Price Index (PPI) for Hides, Skin and Leather (primarily hides) from 1969 through 2016 are shown in the following chart. The chart also correlates these prices with recessions over the same period.

The negative impact on both price indices of recessions is an obvious observation from the chart which shows most of the major corrections in the hide market closely associated with a recession. Two exceptions were in 1997 (Korean Financial Crisis) and 2014 (drop in global commodities due to the China slowdown). For the US hide market, the last major adjustment was arguably the greatest which shows the influence China has on the US hide prices as it probably should with over 60% of its hides exported to that country.

On a final note, after questioning the exceptionally close association of the PPI (source the St. Louis FRED) with the Jacobsen HTS prices, a representative from the US bureau of Labor Statistics explained that the primary component for their data was hide prices leaving the packers.


Livestock, Dairy, & Poultry Outlook

Cattle Report Shows Expansion Continuing, but at Decreasing Rate

USDA National Agricultural Statistics Service (NASS) released its Cattle report January 31, 2017 which showed higher inventory numbers in many categories for the third consecutive year. The total cattle and calf inventory increased about 2% from 2016. Increases were seen in 27 States. States with the largest increases in all cattle and calves include Texas (+500,000 head), Missouri (+250,000 head), Oklahoma (+200,000 head), and Kansas and Colorado (+150,000 head each). The expansion was likely buoyed by a combination of strong cow-calf operator returns in 2014 and 2015 as well as improved pasture and range conditions in much of the Plains region. Beef cow numbers were 3% higher than the same period last year, but milk cow numbers were virtually unchanged Total beef cows increased 3%, but a number of indicators suggest that although the expansion continues, the rate of expansion is slowing. Heifers for beef and milk cow replacement are often used as barometers of herd expansion or contraction rates. Heifers for beef cow replacement were 1% higher than last year but down from the 4% and 3% increases achieved in 2015 and 2016, the first two years of this expansion.

Heifers for milk cow replacement show similar patterns, registering at 1% below 2016 levels, but were positive for the first two years of the expansion. Producers also indicated that they expect only 2% more beef heifers to calve during 2017, down from increases of 7% and 6% in 2015 and 2016.

Despite relatively cheap feed, returns to feeder cattle operations were negative, with losses widening during 2016. Despite expected improvements in cattle feeding returns, feeder cattle supplies outside feedlots are above last year and prices will remain under pressure through much of 2017. Feeder cattle prices for 2017 are forecast to average $131-139 per cwt, down about $7 from 2016.

The number of cattle on feed in U.S. feedlots with a capacity of 1,000-plus head on January 1, 2017, was fractionally higher (Cattle on Feed, January 27, 2017). Cattle placed on feed in December 2016 were up 18% compared with December 2015. This was the second consecutive month that there was a year-over-year double-digit increase in cattle placements. It is likely that lower numbers of cattle grazing on small grains pastures was a contributing factor to the relatively large increase in placements. Winter wheat planted area was lower than 2016 in most of the country, and the estimate of cattle grazing small grain pasture in Texas, Oklahoma, and Kansas on January 1, 2017, was 5% below 2016. Fed cattle marketings in December 2016 were 7% above that of 2015, but the increased numbers of cattle on feed on January 1 2017, and the timing of their placement suggest that fed cattle marketings in the first half of 2017 will be larger than 2016. With 2% more cattle outside feedlots on January 1, placements in 2017 are expected to be above 2016. The timing of placements during the year will depend on a number of factors, including breeding herd decisions, producer decisions about winter wheat graze-out, and the availability of forage during the year.

Commercial beef production in 2016 came in at 6% above that of 2015. Weights were higher in the first half but fell below year-earlier as producers became more current with their marketings. Slaughter in 2017 is forecast higher as cattle placed in the later part of 2016 and first half of 2017 are marketed. Producers are expected to remain relatively current in their marketings during the year, which will limit increases in carcass weights. Beef production for 2017 is forecast at 3% above previous-year levels.

Fed cattle prices are expected to remain under pressure in 2017. Packers’ margins are seasonally weak, which is will likely impact their willingness to bid up cattle prices over the next weeks. As increased supplies of fed cattle are marketed in the spring quarter, fed steer prices are likely to remain under pressure, averaging $106-$110 per cwt during the quarter. Large supplies of fed cattle will likely continue to pressure prices during the second half of the year. Fed steer prices are forecast to average $109-$116 per cwt for the year, down from $120.86 in 2016.

U.S. Beef Exports to Remain Strong in 2017

December trade data, along with annual totals, were released earlier this month. Total beef exports for December reached 254 million pounds, 30% higher year over year. Following weak 2015 beef exports, sales to a number of Asian trading partners (Japan, South Korea, and Taiwan) helped U.S. beef exports recover to 2.55 billion pounds in 2016. Preliminary data suggests higher near-term exports, and with expected higher U.S. beef supplies and more competitive prices, robust demand will likely support an export expansion during 2017 to 2.72 billion pounds.

U.S. beef imports for 2017 are projected to continue their decline from 2016 levels to 2.74 billion pounds in 2017, due to an expected increase in domestic supplies and expected tighter supplies from Oceania.

Live Cattle Imports Forecast Lower in 2017

Total U.S. cattle imports for 2016 were reported at 1.71 million head, down nearly 14% year over year. Since 2014 highs, cattle imports from Canada and Mexico are projected to decrease for a third straight year in 2017 to 1.68 million head. During 2016, higher U.S. cattle supplies and a decline in feeder cattle prices contributed to the decline in imports of feeder animals from both Canada and Mexico. Mexico continues to finish more animals in feedlots and sell increasing amounts of beef to the United States and the rest of the world.

For cattle exports, 2016 totals were down 4% from 2015 to 69,411 head. However, December 2016 exports followed November’s record of the highest monthly total of live cattle exports since 2013. Exports for 2017 are expected to increase to 85,000 head.

Link to complete USDA report:  LIVESTOCK, DAIRY, & POULTRY OUTLOOK


Industry-Related News

Feb 13 (Drovers Cattle Network) US — Profit Tracker: Healthy Profits Continue

Cattle feeding margins increased $15 per head for the week ended Feb. 10, maintaining their perch above $245 per head. That’s $420 better than at this same time last year when red ink flowed to the tune of $176 per head. Packer margins declined $13 per head, leaving their margins positive at slightly more than $5 per head.  READ MORE

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Heating Oil is Steady Despite Robust Inventory Builds

Posted on Feb 16, 2017 in Biodiesel, Vegetable Oil, and Grain

It’s hard to keep heating oil prices down.  Despite larger than expected inventory builds in crude oil, heating oil was higher on the session following the release of inventory data reported by the Energy Information Administration. Imports declined, which should be expected as lower OPEC output starts to reduce production headed to the United States. The Department of Energy reported that U.S. crude oil imports averaged 8.5 million barrels per day last week, down by 881,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.5 million barrels per day, 9.9% above the same four-week period last year.

The EIA reported that U.S. commercial crude oil inventories increased by 9.5 million barrels from the previous week, more than the expected 3.5 million-barrel rise. Gasoline inventories increased by 2.8 million barrels last week, compared to the small draw expected. Distillate fuel inventories decreased by 0.7 million barrels last week which was in line with expectations. Propane inventories fell 2.6 million barrels last week. Total commercial petroleum inventories increased by 11.1 million barrels last week, which is a sizeable build.  In the past two weeks’ propane inventory draws offset crude oil builds but this was not the case this week.

While distillate demand was strong, all other products saw a decline in total demand. Total products demand over the last four-week period averaged about 19.4 million barrels per day, down by 2.0% from the same period last year. Gasoline demand averaged over 8.4 million barrels per day, down by 5.3% year over year over the past month. Distillate fuel demand averaged 3.8 million barrels per day over the last four weeks, up by 7.4% from the same period last year.

Prices are rangebound near the 53 level as traders are not willing to take a short position while OPEC is cutting production.  Traders appear to be waiting for news that will push prices higher.  Resistance is seen near a downward sloping trend line at 1.66, while support is seen near the February lows at 1.60. 

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For any questions or comments in regards to Heating Oil is Steady Despite Robust Inventory Builds, please contact David Becker at Google+, or LinkedIn

 

Biodiesel Market

The trend remains lower for biodiesel RINs.  They may not have dropped as quickly as their ethanol counterparts, but the D4/D6 spreads continue to narrow as biodiesel RINs slowly roll lower while ethanol RINs stabilize.  Bio RINs dropped 3 cents per vintage year.  Ethanol RINs held mostly steady.  Selling pressure was seen early. Market uncertainty has left bids somewhat scare, which has allowed pricing to roam lower.  The B17/E17 spread narrowed towards 42 cents.  Just two weeks’ ago the spread had been as wide as 55 cents, and a month before that, the spread was only 20 cents.

The HOBO spread moved a penny lower, as soybean oil futures continue to slip.  Soybean oil prices are running up against weekly trend support and should they close under support, there could be a significant decline in price.  Bean oil futures closed under 33.94 cents per pound, their lowest level in nearly two weeks.  Heating oil was only fractionally lower.  

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December biodiesel imports jump 19% month over month, finish the year up 98.9%

Per the US Census Bureau, the United States imported 110,629,190 gallons of biodiesel during the month of December.  This is a 19% increase from the 92.90 million gallons imported in November and is 67.7 million gallons more than what was imported during December of 2015.  In a year over year comparison, biodiesel imports hit an all-time high, up an eye popping 98.9% from 2015.  2015 held the previous high for all-time biodiesel import activity. At 356.1 million gallons. 

Out of the seven countries recording shipments to the US, three of them account for 95% of the activity during December. Argentina, Canada, and Germany are the Big Three.  Argentina shipped 78.8 million gallons, 71% of the monthly total and 29% more than what they shipped in November.  Canada sent 15.8 million gallons, accounting for 14.3% of the monthly total and 123% more than shipped in November. Germany exported 10.5 million gallons, 9.5% of the December total and up 75% month over month.  This was Germany’s first monthly appearance in the top 3 of biodiesel exporters to the US.

Argentina, Indonesia, and Canada account for 93% of all biodiesel imported in 2016, 660.45 million gallons. Renewable diesel imports, not part of the US Census Monthly report data, were 198.95 million gallons through November and are projected to be 227 million gallons at the end of December.

Biodiesel imports are 352,084,190 more than they were in 2015, nearly twice the 2015 total of 356,107,273.  In fact, Argentina’s export total of 445,482,708 gallons to the US during 2016, was 25% more than all the biodiesel imported during 2015 from all countries. Adding in expected renewable diesel imports, the total amount of biodiesel and RD imports is expected to reach 935.55 million gallons.

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In accordance with the Presidential directive as expressed in the memorandum of January 20, 2017, from the Assistant to the President and Chief of Staff, entitled “Regulatory Freeze Pending Review,” this action temporarily delays until March 21, 2017, the effective date of this regulation and 29 others.

The Agency’s implementation of this action without opportunity for public comment is based on the good cause exceptions in 5 U.S.C. 553(b)(B) and 553(d)(3), in that seeking public comment is impracticable, unnecessary and contrary to the public interest. The temporary delay in effective dates until March 21, 2017, is necessary to give Agency officials the opportunity for further review and consideration of new regulations, consistent with the memorandum of the Assistant to the President and Chief of Staff, dated January 20, 2017. Given the imminence of these effective dates, seeking prior public comment on this temporary delay would have been impractical, as well as contrary to the public interest in the orderly promulgation and implementation of regulations. In addition, to the extent any regulation below is a procedural rule, it is exempt from notice and comment under 5 U.S.C. 553(b)(A).

Here are the “good cause exceptions” cited above.

§553. Rule making

(b) (B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.

(d) The required publication or service of a substantive rule shall be made not less than 30 days before its effective date, except-

(3) as otherwise provided by the agency for good cause found and published with the rule.

 

 

INDUSTRY-RELATED NEWS


Feb 13 (CNN Money)  Carl Icahn’s Trump role creates ‘unacceptable risk’ of conflicts: Senators – President Trump has tapped Carl Icahn to help him get rid of “strangling regulations” that are hurting the American economy.  Of course, gutting some of those federal rules will also mean big profits for Icahn.   Icahn’s new role as Trump’s special adviser on regulatory reform may already be boosting his vast fortune. Shares of CVR Energy, the oil refiner Icahn controls, spiked 10% the day after Trump announced his appointment.  READ MORE

Feb 13 (Electric Light&Power) Fight over renewable energy comes to New Hampshire  – 

New Hampshire already lags behind most of its neighbors in expanding its use of renewable energy but that hasn’t stopped several groups from using this legislative session to attack those nascent efforts.  Led by the Americans for Prosperity, the advocacy group founded by billionaire Koch brothers, these groups support a bill that would pull New Hampshire out of the nine-state Regional Greenhouse Gas Initiative. The program has reduced carbon dioxide emissions from electrical generation in those eight states by 40 percent over the last decade. .READ MORE

Feb 02 (CommonDreams)  Scott Pruitt Advances, But Is Trump Planning to Abolish EPA Entirely? – Scott Pruitt, the pick to head up the Environmental Protection Agency (EPA), has advanced closer to his confirmation vote, after Republicans on the Senate Environment and Public Works Committee approved his nomination on Thursday.  And while that should leave any Obama-era EPA officials “very worried,” as White House adviser and climate change denier Myron Ebell told the Guardian, the agency may be facing an even grimmer prospect-because President Donald Trump is reportedly taking steps to abolish the EPA entirely. READ MORE

I always look forward to hearing from our customers.  Please feel free to contact me with any questions, comments, or suggestions you may have.  If you buy, sell, or trade any of our products, I would like to hear from you as well.  Bob Lane at bob@thejacobsen.com  847-549-3640.  

 

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MBM trading into China was up $10/MT compared to last week

Posted on Feb 16, 2017 in U.S. and International Animal Fats & Protein

MBM trading into China was up $10/MT compared to last week. Sources have reported that buyers have come back from CNY looking for March and April discounts, but have paid up to cover any shorts that may have arisen during the holiday. Trading into Indo was done at lower prices and in a tighter range, $455 – 465/MT CIF. Sources suggested that any reports above $480 were fake news and that despite a ”should-be” $500 or more market, sellers are struggling to move prices past $470.

Australian prices were unchanged, both for domestic and export this week. Trading out of the New Zealand market was higher, NZ$575 – 585 for 50 pro Bovine MBM.

US exports were steady up $10 from the previous high, with trading reported in a range $530 – 550 CIF SEA. Feed grade poultry meal was done at $620 CIF SEA. Pet grade PBM has traded as high as $850 into China, but other SEA markets were done in a range of $750 – 780 CIF. ANZ sellers reported values as high as $780 into the SEA market.

The local US markets have seen feathermeal prices come off significantly over the last two weeks. Trading in the Eastern markets is off by as much as $55/MT from four weeks ago. Values in the US interior East Coast were reported at an average of $391/MT FOB this week. Ruminant MBM continues to trade in a wide spread, anywhere from $242.50 – 320/MT FOB. Relationships, volume, location and end user specificity all have played into creating the wide spread.

US Protein Exports

Inedible meatmeal tankage exports were up 4.6 TMT compared to November of 2016 and up 12.2 TMT compared to December of 2015. Mexico and Indonesia combined to import 56% of total exports. Feathermeal exports were at their lowest monthly total this year and the lowest monthly total since February of 2012.

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Tallow Prices Consolidate as Energy Begins to Build

Posted on Feb 16, 2017 in U.S. and International Animal Fats & Protein

Tallow Prices Consolidate as Energy Begins to Build

Tallow prices are consolidating and have remained steady as vegetable oil prices have whipsawed generating market trepidation.  Generally, a large rise following by consolidation is a continuation pattern, but tallow prices were unable to climb above the May highs when it visited resistance in November near 32.66. 

Resistance is seen near the Bollinger band high which is 2-standard deviations above the 20-week moving average.  Support is seen near the 20-week moving average near 31 and then below that at the Bollinger band low which is 2-standard deviations below the 20-week moving average at 29. The Bollinger bands are contracting reflecting declining historical volatility.  As energy builds up, the likelihood of a large move begins to build.

Momentum is neutral as the MACD (moving average convergence divergence) index prints in the black, but the trajectory has declined steadily after hitting a high in December, and is nearly zero.

The daily MACD also reflects consolidation. After generating a sell signal in November, it has slowly declined and has a very flat trajectory.

The RSI (relative strength index) which is a momentum oscillator that measures overbought and oversold levels along with momentum.  The current flat line shows very little activity and is printing a reading of 65, which is in the middle of the neutral range and reflects consolidation.

For any questions or comments in regards to Tallow Prices Consolidate as Energy Begins to Build please contact David Becker at davesbecker@gmail.com

Please contact Ryan Standard at 563.223.9021 or ryan@thejacobsen.com with any questions, comments or trading. 

Broiler-fryer slaughter under federal inspection for 10-Feb-17 and 11-Feb-17 is estimated to be 32,775,000 head down 0.66 percent from a week ago and up 4.1 percent from a year ago.

(Last week 32,993,000, last year 31,486,000)

Weekly broiler-fryer slaughter under federal inspection for the week ending 11-Feb-17 is estimated to be 164,077,000 head up 1.03 percent from a week ago, and up 3.28 percent from a year ago. (Last week 162,401,000, last year 158,868,000)

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