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International Hide Activity in China

Posted on Nov 17, 2017 in Hide & Leather

November 10

Buying interest was decent most of this week from tanneries, but most buyers were not willing to pay more money for hides even though packers are holding a very firm tone on some selections such as BBS and HNS.

Many believe this active market will not last long and it will soon come back to quiet when the packers begin to make offers for February/March shipment. Some tanners have been active buyers over the past few weeks because they think it might be the last chance to get hides before the winter season. Also, some buyers who stayed out of the market for too long now need buy some hides even though the leather demand remains slow for many of them.

Most buyers bid below $60 for HTS and between $60-$65 for BBS and HNS C&F. Meanwhile, some packers have started to increase the price for HTS over $60 and BBS/HNS over $65. Several agents reported they were not able to get any HTS sold at $60 or higher this week. Apparently, some packers are feeling more bullish this week than previous weeks; however, most buyers are not feeling the same way.

November 5

The major packers made similar offers as last week. Heavy native and butt branded steers are still the most popular items buyers prefer. Some heavy Texas steers and most Colorado branded steers remain difficult to find many buyers.

Few buyers were willing to pay US$2-$3 more for the packer hides they wanted and many insisted they can only pay the same price as they did for last business. Also, many buyers claimed that they were buying hides only because they wanted to have a supply of best-season hides in hand before winter time comes, not because the leather demand has improved. Some people are quick to point out that we will see a very quiet market again in late November or early December while the packers begin to make new offers with real winter time shipments. Most buyers would walk away by then unless they have new leather orders and must keep buying hides. The quality of the leather out of American packer hides remains an issue for some shoe leather producers and a few have turned to European hides to match their grading requirements.

In general, many people in the China market do not believe the American hide market has finally grounded and will begin to go up. Their feeling is this market still lacks enough energy to move up while the primary market for American steer hides—the shoe leather business—remains slow in China. Price from US$55-$60 for CBS/HTS and US$62-$65 for BBS/HNS are reported, with a few good quality HNS sold close to $70. Several packers tried, but failed to get $70+ booked for HNS.

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Sellers have reported a pick up in bids

Posted on Oct 18, 2017 in Hide & Leather

Trading was lower on dairy steers and dairy cows by $1 today. Branded steers were reported steady. Most in the market commented that selections are steady and the downside of the market, especially on premium selections, appears to be done. Sellers have reported a pick up in bids and there were suggestions that a few prices could pick up before the end of the week.


Today’s Trades

Packer Sales

BS 70 MIN @ $56.00
HBH 51 MIN @ $41.00 OR 0.6275
SHNDC 52/54 @ $40.00 OR 0.5875

Processor Sales

HNDS 60/62 @ $56.00
HBH 52/54 @ $39.00 OR 0.5750
SHNDC 52 MIN @ $36.00 OR 0.5400


Cured and Wet Blue Export Shipments by Selected Countries  —  Through October 5

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U.S. Export Sales & Shipments for Week Ending September 7

Posted on Sep 14, 2017 in Hide & Leather

USDA Hides and Skins Report

Net sales of 492,300 pieces reported for 2017, all whole cattle hides were up noticeably from the previous week and up 40% from the prior four-week average. Increases were primarily for China (370,900 pieces), South Korea (78,000 pieces), Thailand (24,000 pieces), Mexico (9,300 pieces), and Japan (3,400 pieces). Reductions were reported for Taiwan (300 pieces). Exports of 401,300 pieces reported for 2017, all whole cattle hides, were up 3% from the previous week and 5% from the prior four-week average. Exports were primarily to China (287,200 pieces), South Korea (67,500 pieces), Mexico (22,800 pieces), Thailand (8,900 pieces), and Taiwan (6,300 pieces).

Net sales of 154,800 wet blues for 2017 were up 21% from the previous week, but down 16% from the prior four-week average. Increases were reported for Italy (43,300 unsplit), China (38,700 unsplit), Vietnam (23,000 unsplit and 13,600 grain splits), and Mexico (29,600 grain splits and 200 unsplit). Reductions were reported for Thailand (300 unsplit).  Exports of 113,300 wet blues for 2017 were down 32% from the previous week and 34% from the prior four-week average. The primary destinations were Italy (25,500 unsplit and 3,200 grain splits), Vietnam (24,800 unsplit), China (20,700 unsplit), and Mexico (8,800 grain splits and 4,800 unsplit). Net sales of splits totaling 273,900 pounds for 2017 resulted as increases for Vietnam (266,700 pounds) and South Korea (32,000 pounds), were partially offset by reductions for China (24,800 pounds). Exports of 294,100 pounds for 2017 were up noticeably from the previous week and from the prior four-week average. The destinations were China (240,100 pounds), Taiwan (50,000 pounds), and South Korea (4,000 pounds).

Link to Complete USDA Report:  EXPORT-SALES/HIDESFAX

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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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Demand to Low to Overcome Hides From Large Kills

Posted on Jul 14, 2017 in Hide & Leather

It appears that there was not enough demand this week to overcome the wave of hides coming from the large kills prompted by very positive packer margins. Prices this week slipped $1 to $2 on most trading with volume reported to be less than a week’s worth of production. It should be noted that a reporting issue for last week’s export sales and shipment numbers could inflate this week’s numbers on the USDA export report next Thursday if any missed numbers are carried over. In a falling market, pinpointing prices is a moving target and this week was no exception which saw prices changing as the week progressed. Packer HNS, for instance, sold for $67 at the beginning of the week and slipped to $65 toward the end, BBS went from $64 to $62, and HTS from $61 to $60 FOB plant—and there are some unconfirmed reports with much wider ranges. Several people noted that the lack of volume sales made it difficult to get a good feel for prices on some selections.

Week-Ending Slaughter

The week’s estimated cattle slaughter was 637,000. The previous week’s kill was 546,000 and the corresponding week last year it was 598,164. Year-to-date slaughter at 16,678,862 is up 5.2% from 2016.

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Estimated cattle slaughter was 628,000 – the second highest of the year

Posted on Jun 19, 2017 in Hide & Leather

Market Activity & Analysis

The hide market concluded the week with fewer hides traded than over the past several weeks, and likely, under the hides generated. Most of the business was done for steady money as buyers showed no interest in chasing prices any higher, claiming sluggish shoe leather business couldn’t justify any increases. The cow market continued to outperform steers on decent demand from upholstery and fairly stable auto leather.

Week-Ending Slaughter

The week’s estimated cattle slaughter was 628,000—the second highest of the year, coming in under 630,265 on April 27. The previous week’s kill was 622,000 and the same week last year it was 605,596. Year-to-date slaughter at 14,294,262 is up 5.7% from 2016.

Today’s Market

There were only four sales quoted today, including big packer BBS from $66 to $67 and HNS at $67.50.


Today’s Trades

Packer Sales

HNS 60 MIN @ $67.50 OR 0.8775
BBS 62/64 @ $67.00 OR 0.8300
BBS 62/64 @ $66.00 OR 0.8175

Processor Sales

BBS 62 MIN @ $63.00 OR 0.7925


June 3 (Week 21) Actual Cattle Slaughter by Classification

This USDA data is published every Thursday by the USDA Agricultural Marketing Service and reflects actual week-to-date cattle slaughter by classification for the week ending two weeks prior to document release day.


Livestock, Dairy, & Poultry Outlook

Cattle/Beef Summary

Third-quarter commercial beef production is expected to be 6.8 billion pounds, an increase of 5% from the same period last year. Beef production for 2017 is revised downward slightly at 26.2 billion pounds, but remains 4% above last year. Beef-trade forecasts for 2017 and 2018 are unchanged from last month. Prices for 1,100-1,300 pound Choice steers are expected to average $118-$124 per hundredweight (cwt) for the third quarter and $122-$126 per cwt for the year.

Dressed Weights Limit Beef Production on Higher Slaughter

Commercial beef production for April 2017 was fractionally below a year ago. However, with 1 less slaughter day in the month, meatpackers slaughtered 2%, or 54,000 head, more cattle than last year. According to the USDA/NASS Livestock Slaughter report released in May 2017, dressed weights for steers and heifers slaughtered under Federal inspection declined 25 and 22 pounds, respectively, year over year. The decrease in the average carcass weight more than offset the increase in the number of cattle slaughtered and kept production from increasing. The USDA report on beef production under Federal inspection for the week ending May 27 indicates that average dressed weights for steers and heifers continue to decline, falling another 9 and 13 pounds, respectively, from the week ending April 29. Weights are expected to move higher seasonally, but gains will likely be limited while there are incentives to market cattle as rapidly as possible.

Loads sold for delivery in 22 to 60 days averaged above year-earlier levels through mid-April. For meatpackers to meet their commitments as dressed weights decreased, they likely increased slaughter late in the month and into early May. According to the USDA weekly recap of the 5-Area weighted average fed steer price (LM_CT 150), the price experienced a spike in the first week of May to $144.60 per cwt. The demand by meatpackers likely contributed to that price surge. Relative price strength is likely to persist as demand for beef remains strong. However, as summer demand winds down, packer margins will likely decline and cattle prices will be pressured. Third-quarter fed prices are expected to decline seasonally, averaging $118-$124 per cwt, up from $113.26 in third-quarter 2016.

Retailer demand for featuring Choice beef at the start of the summer holidays widened the spread between wholesale prices for Choice and Select beef to historic levels at $30.38 per cwt in the week ending June 9. However, the spread typically reaches its seasonal peak around mid-June, as indicated in the chart below. As demand for grilling-type cuts diminishes and supplies of Choice beef increase seasonally, the spread is expected to decline through late summer.

Third-quarter production is forecast at 6.8 billion pounds, and USDA revised its 2017 commercial beef production down slightly to 26.2 billion pounds. For 2018, beef production was adjusted upward to 27.1 billion pounds on the expectation that more steers and heifers would be available for slaughter next year due to the higher forecast 2017 calf crop.

Feeder Cattle Supply Outside Feedlots Tightens

According to the May 2017 USDA/NASS Cattle on Feed report, year-over-year net placements increased by 12% to 1.78 million head during April, surpassing marketings that totaled 1.70 million head. The large placement number would imply proportionately greater steer and heifer marketings late in the third quarter or early in the fourth. The sharp increase in placements can be attributed to a few factors. First, producers reacted to the unexpected price increase for feeder calves by marketing their calves. Second, higher than normal wheat graze-out likely occurred in the Southern Plains as a result of very low wheat prices. Then those calves on wheat pastures were likely marketed in April, allowing for wheat producers to plant a summer crop. However, according to the ERS estimate of feeder cattle supplies outside feedlots, on April 1 there was only a 0.42% year-over-year increase in the supply of feeder cattle to be placed in feedlots. Large placements of calves during April would likely have further tightened the number of feeder calves available outside the feedlots.

Returns to feedlot operators improved during 2017 as bids for fed cattle moved higher through much of the year and feedlots were marketing calves bought at relatively low prices during the second half of 2016. With expectations of moderate feed prices, feedlots have shown a willingness to bid higher for feeder calves. Although feeder calf prices are expected to decline from their second-quarter peak, they will remain above year-earlier levels into early 2018.

Beef Exports Up, Imports Down Through April 2017

U.S. beef exports for April 2017 increased by 15% to 218 million pounds over the same month a year ago, which was supported by growth in four major destinations-Japan (+18%), South Korea (+8%), Hong Kong (+7%), and Canada (+4%). Increases in exports are likely fueled by higher domestic production and lower beef prices. The U.S. dollar has weakened slightly over the past 2 months relative to most of its trading partners, making it less expensive to buy U.S beef. Exports for the first 4 months of 2017 are also 20% higher than the same period last year, totaling 869 million pounds. Japan remained the number one export destination throughout this period.

In April 2017, U.S. beef imports totaled 250 million pounds, down 8% from the same month a year ago. U.S. beef imports from January through April 2017 totaled 950 million pounds, 11% lower than the same period last year. Increased imports from Canada and Mexico were outweighed by the heavier than expected decline in imports from Oceania through April 2017. Beef supplies remain tight in Australia as herd rebuilding appears to be continuing. As a result, the second-quarter 2017 import forecast was left unchanged, at 775 million pounds.

Cattle Imports Declined and Exports Increased Through April 2017

First-quarter 2017 cattle imports were 5% above the same period a year ago. April 2017 cattle imports were 153.9 thousand head, a 28% decline from the same month a year ago. Declines were seen in both Mexico (-20%) and Canada (-37%). These were the lowest April numbers since 2005. Lower imports during March and April have contributed to 4.5% lower cattle import numbers for the first 4 months of 2017 compared to the same period a year ago. Cattle imports so far this year have totaled 672 thousand head. At the same time, cattle exports increased to 44 thousand head for the first 4 months of 2017, 60% more than the same period a year ago. Higher shipments were made to both Canada and Mexico.

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


The International Market

China

This week, some of the major packers shortened the offer list. A few raised the asking price by US$1-2 per hide, but not many Chinese buyers are willing to follow a firm-up market to pay more than the last price. Several buyers did purchase, although for only limited volume to test water.

Many tanners claim leather demand remains disappointing. Also, since they have been buying hides for a number of weeks, they are not in much hurry to keep booking hides, especially when some packers are asking for more money. Except for CBS, all packer steer hide price on the offering list are already above or well above $70 C&F. It seems that both sides this week are feeling comfortable to just let the week go without much going on.

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

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