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Jacobsen Leather Demand Index – by Guest Columnist David Becker

Posted on Aug 24, 2017 in Hide & Leather

Summary

Leather demand continued to slide in June per the JLDI, with U.S. shoe, car and furniture sales showing declines, which was somewhat offset by upticks in Chinese imports and exports. Car sales continued to decline on a year-over-year basis, dropping 12%, despite solid demand for automobiles. Furniture sales were nearly unchanged in June after peaking in March 2017.

Consumer sentiment moved higher in June, which did not spill over into retail sales. Consumer sentiment printed at historical highs in the first half of 2017. The first six months of the year yielded the highest average for the index since the second half of 2000.

U.S. Auto sales declined for a fourth consecutive month in June. The industry’s seasonally adjusted annualized rate of sales at 16.51 million units was the lowest rate since February 2015. It came in below expectations of 16.6 million vehicles and 2% lower than the June 2016 figure.

U.S. June retail sales fell 0.2%, weighed down by declines in accessories, clothing stores and supermarkets. Retail sales rose 2.8% year-on-year in June. Chinese trade data was solid in June. Exports increased by 11.3% year over year and imports increased by 17.2% year over year in dollar terms.

Economic Data and Monetary Policy

Despite mixed U.S. economic data, the Federal Reserve raised interest rates in June. Jobs data continues to remain strong, but wage inflation has been tepid, which could keep the Federal Reserve on the sidelines for the balance of 2017. The markets are also focused on the European Central Bank (ECB), which is scheduled to end its bond purchase program next March. Investors will be looking for clues from both the ECB President Mario Draghi and Fed Chair Janet Yellen when they both speak next at the Jackson Hole central bank conference in late August.

Looking Forward

The Jackson Hole central bankers conference is anxiously awaited by the markets for an update on the policy course of core central banks, and especially the Federal Open Market Committee (FMOC) and the ECB. General expectations are for no fresh insights from either Chair Yellen or President Draghi. Yellen could reference a policy course, but she is generally seen keeping to the script from the FOMC statements and Fed minutes, as well as from other Fedspeak, indicating the balance sheet unwind will begin soon, likely in September. It will be instructive to hear her assessment on inflation and if the outlook has dipped further, relative to her cautious outlook from the July Humphrey-Hawkins report (The Full Employment and Balanced Growth Act). Meanwhile, Draghi, the ECB central bank President is expected to focus on the symposium theme, while holding off on discussing any changes to the central bank’s balance sheet or other policy discussions.

Chinese trade data was softer than expected in July, which will not bode well for leather demand. China reported July exports were up 7.2%, while imports were up 11.0%. Expectations were for exports to climb 10.9% while imports were forecast to increase 16.6%, in dollar terms.

To produce an index that reflects perceived demand for leather, the JLDI combines changes in the shoes sales, furniture and automobile market given assumption made about the makeup of these markets as leather is concerned. Fluctuation in shoes sales, auto sales, and furniture sales will change the demand dynamic for leather globally.

The JLDI

The Jacobsen derived its leather demand index by using an oscillator that captured an index from 1-100. The index is created from year-over-year changes to each of four time series.

  • Car sales data using a multiplier which includes the percentage index of leather construction is weighted by approximately 14%.
  • Year-over-year leather furniture sales is weighed by approximately 18%.
  • Chinese exports of shoes is evaluated along with imports of hides.
  • US sales of shoes that are leather, which is then weighted by approximately 68%.

The JDLI readings are on the right axis accompanied by prices of Heavy Texas Steer on the left side.


The International Market

Australia

The hide market in Australia remains slow as suppliers await the return of Italian tanners and looks for direction from the ACLE in Shanghai, China, August 30 through September 2. One supplier noted doing a decent amount of business, although it’s all the cheaper selection of hides that are moving. Hides able to be made into leather at $1 per sq. ft. were easily sold, but anything with a better grain was harder to move. Sources say Australia’s hide market shows similarity to the US market, which appears to have bottomed last week with prices stable for the time being.

Slaughter remains strong with last week’s Eastern States total up 14% from a year ago at 126,215 head. Queensland killed 65,486, up 18% on same week last year. New South Wales had a kill of 29,450, up 19% and Victoria and South Australia killed 26,963, up1%.

Beef prices are dropping as more supply hits the domestic market. Cattle prices remain high.

**Visit our International Hide & Leather Bulletin to see market news for additional countries across globe.**


Industry-Related News

Aug 23 (China Daily) BERLIN — BMW Remains Global Most Profitable Automaker Despite ‘Dieselgate’ Cartel Scandals: Study

German car producer BMW Group is the most profitable automaker worldwide despite scandals, a study shows on Tuesday. Despite being at the heart of scandals surrounding diesel engine emissions and recent allegations of illegal collusion among German automotive firms, BMW had a profit of about 5.58 billion euros ($6.6 billion) on a revenue of 49.25 billion euros in the first half of the year. According to the study of the accounting firm Ernst & Young (EY), BMW is then followed by Suzuki, Daimler, GM and Volkswagen.  READ MORE

Aug 22 (International Leather Maker) MICHIGAN — Adient to Acquire U.S. Headquartered Seating Manufacturer

Automotive seating Group Adient announced that it has signed a definitive agreement to acquire Michigan, U.S., headquartered Futuris Group. The purchase price is approximately US$360 million, including the assumption of approximately US$18 million of net debt.  READ MORE

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DDGS Output Remains Elevated on Strong Ethanol Production

Posted on Aug 24, 2017 in Biodiesel, Vegetable Oil, and Grain

Per the EIA’s Weekly Petroleum Status Report, average weekly ethanol production remained very strong over the latest reporting period. During the week ending Aug 18th, production averaged 1.052 million barrels per day, down 7,000 barrels a day from the week prior. Gasoline demand increased by 107,000 barrels per day to 9.63 million. Ethanol stocks narrowed 319,000 barrels to 21.509 million. Ethanol imports reverted to zero. The decrease in ethanol production lowered corn demand by up to 104,000 bushels per day. DDGS output fell in sync with ethanol production, edging 0.66% lower, week over week.

Year to date, ethanol production has averaged 1,023,242 b/d, which is up 898,000 barrels per day from last week and remains above last year’s average of 981,000 b/d. At its current pace, the industry is on track to produce 15.67 billion gallons, well beyond the 2017 finalized ethanol RVO of 15 billion gallons. Whether the industry can blend enough to meet the mandate remains the question.  Average ethanol production for the latest week is 24,000 barrels a day more than it was a year ago (1,052K bpd vs. 1,028K bpd). Domestic gasoline demand increased by 1.12%. Ethanol inventories narrowed 1.46% to 21.51 million barrels.  Ethanol production as a percent of gasoline demand dropped to 10.93%. 2017 gasoline demand is, on average, 9.02 million gallons less per day than it was over the same period in 2016.

Approximately 15.59 million bushels of corn were used daily in the production of ethanol and, as a co-product of production, 112,499 metric tons of livestock feed was produced daily. DDGS production accounted for 100,054 metric tons, with the balance comprised of 10,501 MT of corn gluten feed and 1,945 MT of corn gluten meal.  Additionally, 6.82 million pounds of distillers’ corn oil was produced daily from dry mill ethanol plants.

The estimated ethanol-processing margin decreased 3.5%. Revenue derived from ethanol and DDGS sales fell by 15 cents per bushel, while the cost of corn slipped 9 cents per bushel.  This allowed the margin to narrow by 4 cents to $1.10 per bushel.

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The Closing Numbers

Posted on Aug 24, 2017 in Biodiesel, Vegetable Oil, and Grain

Not quite the follow through that some anticipated following the Commerce Departments announcement on their preliminary findings and countervailing duties on Argentine and Indonesian biodiesel imports. However, RINs did push higher, and with the B17’s trading at 118, prices closed at their highest level since December. The B17/E17 RIN spread expanded to 29 cents, continuing to expand as biodiesel RIN prices move higher while ethanol RIN values remain somewhat steady.  The spread had been as narrow 14 cents just over a week ago.

Soybean oil also received a significant boost in price. The September and December contracts both closed more than 60 points higher, with the Dec contract trading as high as 35.37 cents per pound before pulling back and settling at 35.06.  Heating oil rose 3 cents to $1.62 per gallon.  The stronger move in soybean oil prices pushed the bean oil/heating oil spread to 93 cents per gallon.  It’s highest showing in more than four weeks.

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Weekly LCFS Credit Trading

Trading of LCFS credits during the week ending Aug 20th saw an increase of more than 500%.  Per California’s Air Resource board (CARB), 193,767 credits traded between Aug 14th and Aug 20th. The number of credits changing hands jumped 162,125 week over week and increased the year’s weekly average from 103,523 to 106,257 credits weekly.

CARB data shows that the price range the credits traded in expanded and moved higher.  Credits traded between $72.00 and $95.00, with the average price being $84.26. The prior week saw a range of $74.78 and $87.50, with an average price of $76.08.  There were 27 transfers recorded during the week, 27 more than were recorded during the prior week and 13 more than the 2017 weekly average of 14 transfers.

The average CARB credit trading price is in line with the range outside brokers had been indicating the market to be over the same time frame. CARB’s weekly report excludes 3 transfers totaling 19,288 credits because they were reported at zero or near-zero dollar prices.  CARB only includes transfers that were completed in the given week.  Any transfers proposed and still pending confirmation are excluded.

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For any questions or comments in regards to Bean Oil Rebounds but Market Remains Subject to Further Downside, please contact David Becker at Google+, or LinkedIn

 

INDUSTRY-RELATED NEWS


Aug 15 (Reuters) EPA erred in denying renewable fuel hardship exemption: courts – The U.S. Environmental Protection Agency used too strict of a test when it wrongfully denied Sinclair Oil’s request for an exemption from the country’s biofuel regulations, a U.S. appeals court ruled on Tuesday.   The ruling could potentially broaden the rules governing such exemptions, forcing the EPA to grant more in future years under the controversial Renewable Fuel Standard program. READ MORE

Aug 08 (Biomass Magazine)  Neste reports record quarterly renewable diesel sales – Neste has released financial results for the second quarter of 2017, reporting record-high sales volumes of renewable fuels. The company sold 674,000 tons of renewable diesel during the three-month period.  During the second quarter, the company’s renewable products division recorded a comparable operating profit of EUR 101 million ($118.61 million), compared to EUR 119 million during the same period of last year. According to Neste, the segment was able to keep its result at a good level with the support of higher sales volumes and a more favorable market despite the expiration of the blenders tax credit in the U.S.  READ MORE

Aug 08 (Canada Newswire)  BIOX Announces 2017 Third Quarter Results –  BIOX sold 16.1 million litres and 45.0 million litres of biodiesel in Q3 2017 and YTD 2017, respectively, compared to 34.8 million litres and 78.2 million litres in the corresponding periods in fiscal 2016. The changes in sales and volume sold for both Q3 2017 and YTD 2017 are primarily due to lower sales of third-party product. The Company sold less than 0.2 million litres and 0.3 million litres of third-party product in Q3 2017 and YTD periods, respectively, compared to 22.1 million litres and 32.8 million litres of third-party product sales in the corresponding periods in fiscal 2016. READ MORE

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The BFT Quiet Despite the Countervailing Tariff News

Posted on Aug 24, 2017 in Animal Fats & Oils

The BFT remained quiet today even with the announcement that a countervailing tariff may be placed on Argentinian imports.  This would become on all imported goods effective 90 days prior publication in the Federal Register.  This means that the price of Argentinian Biofuels would increase and make the US biofuel market demand more feedstocks for biofuels.  Soybean oil rallied today by as much at .75 to nearly a cent only to settle well below the high of the day.  So far it has not affected the animal fat prices around the US, but many are wondering not only if but when it will.  So the market today is like a deer caught in headlights and is stuck waiting to see what happens next.

No changes in any of the animal fat markets today, but a lot of lip service given to the tariff on Argentine imports.

Broiler-fryer slaughter under federal inspection for 23-Aug-17 is estimated to be 33,300,000 head up 3.00 percent from a week ago and up 1.9 percent from a year ago.  (Last week 32,329,000, last year 32,669,000).

Broiler-Type Eggs Set in the United States Up 5 Percent 

Hatcheries in the United States weekly program set 226 million eggs in incubators during the week ending August 19, 2017, up 5 percent from a year ago.

Broiler-Type Chicks Placed in the United States Up 4 Percent

Broiler growers in the United States weekly program placed 184 million chicks for meat production during the week ending August 19, 2017, up 4 percent from a year ago.

Read More