Don Ohsman's view from America

News from Brazil and Argentina in the second week of March indicated that their slaughter will be reduced for the next six months due to governmental policies which should have a positive effect on US prices but, so far, it has not. The discovery of a case of BSE in the US shortly thereafter also had no effect on hide prices.

The name of the popular poker game 'Texas hold em' could best describe the heavy Texas steer market this month. Major producers have been offering 60/62lb averages at $67. This is the same asking price that has been in place since mid February. As has been the case since then, buyers refused to pay over $66 just as traders refused to sell below $66 leaving the Texas market, when all is said and done, about the same as it's been for nearly a month.

Producers of butt branded steers offered this selection again this week on a par with Texas, or generally at $67. For nearly a month there has been much resistance but ultimately trading occurred between $66-66.50 depending on origin, average and destination. Heavy western averages sold at $66.50 with one unconfirmed report heard of $67 being done.

Heavy native steers that had pushed $0.50 higher early in the month fell back this past week. Offering prices of heavy native steers this week are at $67.50, or generally steady with asking prices as well as sales that were concluded a week ago. Buyers held the line however at $67 where the bulk of the country's better production traded. Averages were typically between 62-66lb. An increase of heavy native steers in the slaughter mix took some of the buying pressure off of automotive tanners helping them to convince producers to return to the $67 price level.

There were a few heavy native heifer offerings at $60 on 50/52lb averages, but any such sales could not be confirmed. Demand for branded heifers continued to be quite keen but offerings are practically non existent.

As has been the case with most steer selections, offerings of branded steers were steady with previous weeks at $66. Producers tried hard to pull higher bids from buyers, but on averages between 60-64lb. $65 appeared to be the maximum possible. Heavy western averages traded at prices close to $66 from advantageous freight points. In general, Asian tanners were willing to pay between $70.50-71.50 c&f depending on their location and payment terms. As usual, there were not too many Colorado steers offered, but what was available was at $64-65 with buyer interest fading at anything over $63-63.50.

When compared to the second part of February, demand for bulls has improved. Mostly natives were sold by one producer to Asia at an fob basis of $48 on heavy averages. Natives with some Holstein content traded at $53 in several directions. Several loads of branded bulls traded at $50 Laredo on 100/110lb averages and native bulls on 100/110lb averages with a small brand content were bid at $52 and countered by the well sold producer at $54 which was passed.

Movement in both branded and native plump cows has been fairly decent so far in March except for those producers who increased asking levels more than incrementally over previous sales. River area brands sold at $38 on 50/52lb up $0.50 from earlier in the month. Southwestern branded cows traded at $37.50 for one packer production with similar material offered into Asia at $44 c&f and not accepted by tanners there.

Offerings of northern branded cows at $45-46 failed to attract much buyer attention. Heavy native cows traded steady from one origin at $47. One packer was able to get $53-53.50 fob for their production that averaged close to 60lb.

Buyer interest appeared to be less than robust on Holsteins however. Typical offerings from better producers were at $53 fob but the best bids seen in most cases were at $51 which was accepted by some. Selling prices on a c&f basis were generally at $55. Holstein steers were offered at $66 steady with prices of the past month.

It's premature to assess the possible ramifications of the Argentine situation or, for that matter, the situation in Brazil. The governments of both countries have invoked policies that are likely to restrict the supply of wet-blue and crust that will keep those markets very strong at least into summer if not beyond.

It is difficult to become bearish given the Latin American situation and the export statistics. Add to this the ongoing retailer reports of sales of leather products and what could still be latent demand for hides in China before permits expire, and one can easily adopt a bullish outlook.

However, as the saying goes, 'the proof is in the pudding.' In other words, why haven't prices risen in the past several weeks?

When looking at Texas, butts and branded steers, our assessment is that well forward producer positions, combined with what we now see as normally stocked tanners, regardless of their enjoyment of very good and seemingly profitable leather business, is back in balance again.

Hidenet's guesstimate after reviewing the situation is that the market is not going above current levels prior to Hong Kong and is likely to ease as April begins. The key to this theory is what happens during tanner visits just prior to the fair and during the event itself. From today's vantage point, it seems to us that there will not be enough business concluded to push prices any higher.

Looking beyond the first part of April, the expiry of Chinese import permits between then and summer and the cessation of the 'hot' season for leather, leads us to anticipate somewhat lower prices in May and June.

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