The Week at a Glance
- Prices firmly steady to higher
- Packer capacity increases
- Labor shortage critical issue for processors
- Hebei tannery closings
- Cattle imports lowered, exports raised for 2017 and 2018
- Combined sales 761,500 *
- Combined shipments 455,600
- Combined outstanding 4,805,500
- Sales exceed slaughter/shipments below*
- Forecast: Firmly steady to selectively higher
- Market Observations: How bad is it?
Heavy Texas Steers up $1.00
Volume in 66/68 lb.Texas steers appeared to be limited due to the fairly well sold positions of producers. There were a few sales reported at $54.00 as well as $55.00. Offerings of 74/76 lbs. were seen at $65.00 and 84 and up at $69.00 but there were not any confirmed sales reported.
Branded Steers steady
Branded steers/aka Colorado found decent interest, but sellers were pressed to obtain prices above the previous week. The bulk of bids was at $52.00. By yesterday, producers who turned down lower bids were eventually able to post sales at 66/68 lbs. $53.00 and ultimately $53.50. An unconfirmed trade was heard at $54.00 today. Quotes on a c&f basis were seen at $$59.50 and up to $61.00.
Butt Branded Steers steady
Offerings of butts were relatively scarce, due to well sold producers. Sales were recorded on Tuesday at $60.00 on 66/68 lbs. This morning, one trade was posted at $60.50 and another at $61.00.
Heavy Native Steers steady to higher
Natives found decent interest in the later part of the week. Early business was done at $64.00 but by late Wednesday, $66.00 was said to have been done. Today $65.00 was booked on 66/68 lbs. However other trade was done Thursday night at both $64.00 and $64.50. One sale was seen at $72.50 on 78/80 lbs.
Heifers dollars higher
Heifer activity perked up this week as more were shown by producers. 47/49 premium natives sold at $55.00. 54/56 lb. branded heifers were posted at $47.00 and 50/52 lbs. at $43.00. It should be noted that the difference in branded heifer prices is not only weight averages, but also due to geographic origin.
Plump Cows steady
Branded cows seemed to find a bit better demand this week, but not enough to generate any higher prices. 52/54 lb. natives traded at $35.00 and up to $36.00, steady to a week ago. Brands sold between $27.00 and $28.00 depending on origin.
Western packer dairy steers sold at $66.00 on 66/68 lbs. but there were not any confirmed sales reported. 54/56 lb. dairy cows sold at $47.00 and $48.00.
Natives were offered by one packer at $51.00 on lighter weights. Other natives with some holstein content could be bought at $52.00 Laredo on 90/100 lbs.
Natives with a small brand content were available at $46.00 Laredo.
A relatively recent sale on seasonal average machine damaged thirds was heard at $37.00
Fleshed packer material averaging 28/29lbs.sold at $9.00 Laredo
Packer capacity increases
Cable Buyers Weekly reported today that daily slaughter capacity at the nation’s 30 largest beef processing companies is on the increase, largely due to increased slaughter cattle numbers. The Top 30 packers currently have the capacity to process 125,715 head per day in 52 plants. That’s 2345 head more than the total capacity of 123,370 head a year ago, also in 52 plants.
The increase reflects an increased capacity (of 1500 head) reported by JBS USA and the entry into CBW’s 30th annual ranking of the top packers of CS Beef Packers, Kuna, Idaho. This mainly cow processor has a daily capacity of 1700 head. It is a joint venture between Caviness Beef Packers, Amarillo, Texas, and the J.R. Simplot Company, Boise, Idaho, and began operations May 30 this year.
A multi-year decline in U.S. cattle numbers took out more than 14,000 head of daily slaughter capacity in 2013 and 2014. Numbers increased in 2014 and 2015 but they declined slightly in 2016. The latest numbers suggest the industry has sufficient capacity to process the increase in slaughter cattle supplies next year. Labor might be the inhibiting issue.
The top five packers, Tyson Foods, JBS, Cargill, National Beef Packing and American Foods Group, have a combined capacity of 99,500 head per day in 27 plants, up from 98,000 head a year ago because of JBS’s reported increase. Tyson maintains its position as the U.S.’s largest beef processor in terms of daily slaughter capacity (equal with JBS USA) and sales. It has the capacity to process 29,000 head per day and had beef sales in fiscal 2016 of $14.513 billion. Second is JBS at 29,000 head and sales of $13.500 billion. Third is Cargill Protein at 23,000 head and sales of $11.100 billion. National Beef is fourth at 12,000 head and sales of $6.984 billion.
The top three packers had a market share of total commercial cattle slaughter in 2016 of 63.1%, the same as in 2015. But their share of steer and heifer slaughter declined to 70.8% from 71.5% in 2015. The top five packers’ share of commercial slaughter was 78.2% versus 78.3% in 2015. Their share of steer and heifer slaughter was 86.6 versus 87.9% in 2016. CBW uses actual slaughter data to calculate market share.
Labor shortage critical issue for processors
According to a survey by Cattle Buyers Weekly, U.S. processors face a growing labor shortage. This is especially true for beef processing plants and concerns both unskilled and skilled workers. CBW surveyed the Top 30 Packers and almost all beef processors tagged labor as the top issue facing the industry, raising concerns that packers will not be able to process the cattle that will be harvested next year.
CBW estimates that industry-wide capacity is about 126,000 head per day. Daily slaughter this year has been limited by labor as well as the availability of fed cattle. With the supply of market-ready cattle set to be much larger beginning early next spring, it calls into question the ability of producers to kill a larger number of cattle. Daily kills this year have hardly exceeded 120,000 head. Saturday slaughter capacity has also been limited and only three Saturday kills exceeded 60,000 head on non-holiday weeks, all after late September. “This suggests packers are able to find enough workers to staff a full single shift on Saturday but nothing more.” noted CBW.
Tyson Foods is the largest processor of fed cattle and is experiencing a shortage of qualified labor, president and CEO Tom Hayes told CBW. Paying higher wages and introducing automation for the most difficult jobs are among the tactics Tyson is using.
Cargill Protein president Brian Sikes says the labor shortage has become an ongoing concern, fueled by changing immigration policies and limited labor pools in many rural areas. An improving economy and competition from manufacturing and agriculture, creates competition for labor for large as well as small packers.
Analyst Dave Weaber of EMI Analytics and Express Markets in a recent presentation noted the expected increase in beef production to record levels. The previous peak was 27 billion lbs and the industry is now looking at close to 30 billion lbs. There are huge price impacts when you have a market that large, he says.
Cattle Buyers Weekly celebrates 30th birthday
CATTLE Buyers Weekly begins its 31st year of covering the North American meat and livestock industry, with a special focus on the U.S. beef industry. CBW wishes to thank its readers for their unwavering support over the past 30 years. It is privileged to have readers in every sector of the industry, in allied industries and in government agencies in the U.S. and other countries. This level of support and encouragement is why CBW has reached this milestone. This would not have been possible but for its faithful readers. CBW especially values its charter subscribers who helped support and encourage CBW in its early years.
CBW’s first issue on December 7, 1987 included stories on the disappearance of the Swift name from the beef industry and the closure of Litvak Meat Co., Denver, Colo. CBW has covered every structural change in the North American beef industry since then, plus developments in the industries of other major beef-producing countries. It will continue to analyze the key supply and demand issues facing the industry, as well as structural changes and packers’ financial performances. CBW also offers other services, including research projects, presentations to industry groups, consultations with private clients and the sharing of exclusive CBW data.
Hebei tannery closings
More news has been heard this week about the Chinese government further crackdown on “dirty” industries in the Hebei area. One source said today that the imposed shutdown of factories of many products, including tanners, could be forced to close early in January.
Cattle Imports Lowered and Exports Raised for 2017 and 2018
The U.S. cattle import forecast for 2017 was revised downward by 10,000 head from last month. A slower pace of U.S. cattle imports during August and a decline in imports in September resulted in a 3% growth in imports from January through September 2017 relative to the previous year, to 1.275 million head. September 2017 cattle imports were 6,708 head lower than the same month last year, to 100,884 head. Imports declined from Canada (-9,510 head), outweighing increases from Mexico (+2,802 head). The cattle import forecast for 2018 was also lowered by 10,000 head from last month.
Cattle exports for 2017 were raised by 15,000 head from last month’s forecast, based on higher year-to-date growth and expected seasonally higher fourth-quarter exports. Exports through September of 97,986 head are more than double last year’s exports during the same period. U.S. cattle shipments through September are higher to both Canada (+44,942 head) and Mexico (+7,939 head) compared to last year. The forecast for 2018 cattle exports was also adjusted higher by 15,000 head.
Link to complete USDA report: LIVESTOCK, DAIRY, & POULTRY OUTLOOK
Asia-Pacific Car Interior Leather Market 2017
The Asia-Pacific Car Interior Leather Market 2017 Research report contains a qualified and comprehensive analysis of the Car Interior Leather Market. Initially, the report provides the current Car Interior Leather business scenario along with a proper evaluation of the industry. The Asia-Pacific Car Interior Leather report is divided on the basis of leading industry players, application and regions. Ongoing market conditions are also revealed in the report.
Geographically, the Car Interior Leather industry report splits the Asia-Pacific area into several key Regions (Southeast Asia, Australia, India, Japan, China, South Korea and Taiwan), with revenue, sales, market share and growth rates of the Car Interior Leather for these regions.
Raw hide sales down 41%
Net sales of 297,500 pieces reported for the week ending November 23, were down 41 percent from the previous week’s 502,500 and down 44 percent from the prior 4-week average. Two weeks ago, sales were said to be 604,000. For 2018, net sales were 4,400, totaling 301,900.
Shipments of 339,200 pieces reported the period were down 16 percent from the previous week’s 403,900 and 26 percent from the prior 4-week average. Two weeks ago, shipments were 492,300.
Wet blue sales *
Net sales of 99,600 wet blues for 2017 were up noticeably from the previous week’s 9,600 and up 8 percent from the prior 4-week average. Two weeks ago, sales were 62,500. For 2018, net sales of *360,000 wet blues were reported, totaling 459,600.
Shipments of 116,400 wet blues for the period were up 72 percent from the previous week’s 67,700 and up 14 percent from the prior 4-week average. Two weeks ago, shipments were 80,600.
Combined Outstanding down 1%
The combined raw and wet blue hides sold but not yet shipped totaled 4,805,500 This is down 1% from last weeks 4,859,200. Two weeks ago 4,813,400 were outstanding.
Combined Shipments down 3%
Combined wet salted and wet blue shipments for the period were 455,600 This is down 3% from last weeks 471,602. Two weeks ago, 572,900 were shipped.
*Sales exceed slaughter/shipments below
Slaughter for the period was 649,00. Combined export sales were 757,100, including those reported for 2018. Adding an estimated domestic weekly consumption of 35,000, total sales were 792,100 and shipments totaled 455,600 pieces. Therefore, sales surpassed slaughter by 193,400 but shipments were 193,400 below.
*Taking away what is believed a long term wet blue sale likely to Italy for 2018, this weeks export numbers again are below slaughter. Shipments were also below slaughter as the combined outstanding remains at unusually high numbers.
Wet Blue Splits
Net sales of splits totaling 555,500 pounds for 2017 were for Vietnam (789,500 pounds) and South Korea (30,000 pounds). Reductions were reported for China (264,000 pounds). Exports of 165,200 pounds for 2017 were down noticeably from the previous week and 53 percent from the prior 4-week average. The destinations were Vietnam (158,200 pounds) and South Korea (7,000 pounds). 1,800,000 ls.were outstanding.
While some steer prices advanced this week most were just steady to last. This leads us to conclude that sellers who tried to attain advances, met with little success, even though demand for heavy native and butt branded steers was considered to be good. The same holds true for the cow sector. This gives us a neutral bias.
Tale of the Scale
We are placing the scale of supply and demand in balance today. Our impression is that buyers and sellers are generally satisfied with their positoins.
How was last week’s forecast?
There was not any forecast last week due to the long Thanksgiving holiday.
For the coming week
Firmly Steady to selectively higher
The bears are content in that despite a perceived “shortage” of heavy native and butt branded steers, buyers, in most cases, did not have to reach above steady levels to secure what they needed. They noted steady prices on other selections. They think that the market is going to have to struggle to stay steady once Christmas/New Year holiday’s and Lunar New Year shutdowns deter buying enough to take up continuing heavy slaughter.
The bulls note that each week gets us closer to the peak leather selling season in the first quarter of the coming year. The growing and expanding economy of the developed world will increase consumer disposable income,which should translate into better demand for leather products.
How bad is it?
Since the All Leather China Fair in Shanghai last September, heavy Texas steer prices have gone from $48.00/$49.00 to $53.50 today. Butts have risen from $55.00/$56.00 around the time of the Fair to $60.00/$61.00 this week.
Branded/Colorado steers rose from $49.00/$50.00 t0 $53.50 today.
During this time frame, each week brought more news of how bad shoe leather business was, and that automotive leather upholstery consumption was waning. Kills surpassed slaughter and sales just about every week. The outstanding sales number of sold but not shipped hides/blue grew to the high’s of the year. What was considered a glut of wet blue at the end of summer, found and developed good demand in Italy and firmed up that market.
So how bad is it? Not very.
Producers may be pressed to retain liquidity during the Christmas/New Year holidays in much of the world, plus Lunar New Year starting in February in Asia. However, these should not cause anymore than temporary disruption, for which packers and traders know how to prepare.
Leather demand is seasonally bound to increase in the first quarter. If prices rose this fall, it is hard not to imagine they won’t be higher as the first quarter begins.
Federally Inspected Slaughter
Federally inspected slaughter through Saturday, December 1st is estimated to be 649,00. This is up from last week’s holiday shortened kill of 572,000. A year ago, the kill totaled 616,000. For the year to date, total slaughter is 29,327,000. This is up 5.5% from last year’s 27,812,000 head, or 1,515,000 more hides on the market.
Quotes for Success
“Forget the mistake. Remember the lesson.”
PRICES AT THE CLOSE OF TRADING
|SELECTION||WEIGHT||PER PC FOB||LAST WEEK||LAST YEAR|
|Heavy Texas Steers||66-68||$54.00-$55.00||$53.00-$54.00||$69.00 – 72.00|
|Heavy Texas Steers (Heavy)||74-76||$54.00-58.00||$54.00-58.00||$73.00-73.50|
|Branded Steers (Heavy)||74-76||$57.00-58.00||$57.00-58.00||$72.00-73.00|
|Colorado Steers (Heavy)||74-76||$57.00-58.00||$57.00-58.00||–|
|Butt Branded Steers||66-68||$60.00-61.00||$60.00-61.00||$72.00-73.00|
|Butt Branded Steers (Heavy)||74-76||$65.00- 66.00||$65.00- 66.00||$79.00 – 80.00|
|Heavy Native Steers||66-68||$64.00-66..00||$63.50-64.00||$76.00 – 76.50|
|Heavy Native Steers (Heavy)||74-76||$71.00-72.50||$70.00-72.00||$81.00 -82.00|
|Heavy Native Heifers||52-54||$52.00-55.00||$49.00-50.00||$57.50 – 58.00|
|Branded Heifers||52-54||$43.00-$47.00||$41.00-41.50||$54.00– 55.00|
|Heavy Native Cows||52-54||$35.00-36.00||$35.00-36.00||$43.00-45.00|
|Branded Cows||52-54||$27.00–28.00||$27.00–28.00||$35.00 – 36.50|
|Holstein dairy cows||52-54||$47.00-48.00||$46.00-48.00||$54.00-55.00|
|Native Bulls||100-110||$45.00-46.00 n||$45.00-46.00 n||$52.00 – 59.00 n|