View from the US25 January 2023
The start of December saw some cracks develop in the US hide market’s stable footing. Producers who had been well positioned on popular steer selections eventually found making sales at steady levels more difficult.
The start of December saw some cracks develop in the US hide market’s stable footing. Producers who had been well positioned on popular steer selections eventually found making sales at steady levels more difficult. Also, demand for wet-blue was reported to be dragging the market down because demand, especially for footwear, was minimal.
The price of heavy Texas steers remained fairly steady, although by the end of November rumours of sales below market level were common. Seasonal weights were reported to sell at $25.00, and volumes were not substantial and prices remained weak. Colorados also dropped back, losing $2.00 by the start of December, with 62/64lb selections selling for $24.00. Hides for the automotive sector were still under pressure and were difficult to sell, which pushed the price down. Heavy native steers were reported to sell dollars lower at $36.00.
The cow sector managed to keep prices relatively steady thanks to decent demand, driven by how inexpensive the selections were. Some sellers were still able to move enough cow hides at stable levels.
Overall, export sales were higher in October, both for salted hides and wet-blue. Rawhide sales averaged 514,175 weekly, which is 23% higher than September’s average and 21% more than October 2021. It’s also the highest October average since at least 2013. On the other hand, rawhide shipments averaged 401,300 weekly in October, down 15% from September and 1% from October 2021.
With regard to wet-blue, sales were up dramatically. October wet-blue sales averaged 165,950. This is 120% more than September’s average and 16% higher than October 2021. By contrast, shipments were a little lower. Wet-blue shipments averaged 147,550 in October. The figure is down 5% from September’s average and 4% from October 2021.
Cattle and calves on feed for the slaughter market in the US for feedlots with capacity of 1,000 or more head totalled 11.7 million head on 1 November 2022. The inventory was 2% below 1 November 2021.
Placements in feedlots during October totalled 2.11 million head, 6% below 2021. Placements were the lowest for October since the series began in 1996. Net placements were 2.05 million head. During October, placements of cattle and calves weighing less than 600lb were 545,000 head, 600– 699lb were 465,000 head, 700–799lb were 450,000 head, 800–899lb were 378,000 head, 900–999lb were 190,000 head, and 1,000lb and greater were 80,000 head.
Marketings of fed cattle during October totalled 1.80 million head, 1% above 2021. Other disappearance totalled 54,000 head during October, 5% below 2021.
US beef production decline
Volatility could be on the horizon for the global beef industry, which may affect markets negatively in 2023. This is according to the November 2022 Global Beef Quarterly report from Rabobank.
Production is starting to decline in beefproducing nations in the northern hemisphere. The southern hemisphere, on the other hand, is trending towards higher production. Numbers in the US and Europe are expected to decline in late 2022 and into the first quarter of 2023. In places such as Brazil, Australia and China, production is forecasted to rise or at least stay steady.
“Overall, we expect total production volumes for key markets in Q4 2022 and Q1 2023 to be similar to their corresponding periods a year earlier,” said the Rabobank report.
In addition, historic inflation could soften consumer beef demand and supply dynamics remain uncertain as well. The strong dollar also means US cattle are very expensive for the rest of the world.
Rabobank said US beef production is expected to drop by 3% in 2023 thanks to significant herd liquidation. The decline could be from 2% to 5% in each subsequent year through 2026. A shrinking beef supply will also test consumer willingness to pay higher meat prices.
“US consumers will likely eat as much beef as they can afford,” said the Rabobank report. “Therefore, household incomes will be a critical factor going forward, with the compounding effects of higher beef costs and limited real wage growth affecting consumption.”
The US hide market was mainly steady for the better part of two months, but some would say it was artificial stability. Moreover, by the end of November, there were cracks forming in the market’s facade. Seller positions were not as good as advertised and the pressure was on, particularly as weekly slaughter remained very high.
Prices could decline a little with the demand outlook iffy for the first months of 2023; however, no one is predicting a significant downturn. Actually, the market could get a good boost if China’s easing of some Covid restrictions actually works; however, that is far from a sure thing – or a speedy one.
In the case of wet-blue, some say the lack of demand is dragging the market down. On the other hand, those who sell wet-blue point to poor positions on cured hides as the main reason for slow business. Demand is indeed minimal for wetblue at the end of 2022, given that large footwear manufacturers stocks and the short-term outlook for footwear is depressed.
Indeed, hides are still quite cheap comparatively and this fact has been just enough to keep sales going. By the start of December, however, it was taking longer for producers to close deals during the week as customers – especially those in China – grew more hesitant.
With demand less than robust, the question arises as to who was doing the buying in the bearish climate. Looking at the weekly export sales data, it’s clear that no matter what was going on in China, buyers there were still taking a majority of the raw hides.
Sources noted that in many cases, Chinese customers were buying hides to sell the splits – at good prices – and save the grain for later. A global expert said that in the split market there was tension in discussions between buyers and sellers, but that prices have remained stable.
In the autumn months, both the split market for food and footwear had good demand; however, that was said to be slowing. The food segment had already filled its raw material inventories and started to withdraw from the purchasing market. So, for how much longer this would be attractive to tanneries was an open question.
When it comes to destinations for the hides, some sources said three main areas were supporting the US market:
¦ domestic Chinese tanners, mainly for shoes and automotive, despite the fact that orders are lower in many cases
¦ a small improvement in Mexican volumes thanks to reshoring, mainly for footwear and automotive
¦ some tanners in Thailand, who picked up some business from China
As another year was drawing to a close with a good deal of uncertainty hanging over the market, prices were likely to remain soft. Overall, buyers could buy hides for a little less and get them shipped quickly.