View from the US

Benchmark heavy Texas steers sold during the first six weeks of the year at $30–34 FOB. The high end was attributed to small volume sales and most in the industry agreed the true market was closer to $30. Trading of regular weights was nearly non-existent thanks to producer positions and low activity. Jumbo weights were still widely available with 74 averages sold at $36–38.50. Regardless, Texas prices had been holding steady since the last quarter of the year. The average during Q4 of 2018 was $31.23, just $0.50 lower than the average so far in 2019, which is $31.83.

With the cow sector well sold ahead of the holiday, price pressures eased. Branded cows were able to hold prices steady, with the most favoured types trading at $12–13 on 54/56lb averages.

Thanks to the government shutdown, much reporting on exports, sales and other data was delayed. The USDA’s January Cattle on Feed report was due to be published in February but was rescheduled for 8 March. The USDA’s annual cattle inventory report was expected on 28 February.

The USDA did, however, lower its estimates for total red meat and poultry production for 2018. The World Agricultural Supply and Demand Estimates report reduced beef production on lower cattle slaughter and lighter carcass weights through late December. The 2019 beef production forecast was also reduced on lower projected slaughter as smaller anticipated placements in late 2018 and early 2019 are expected to result in lower fed cattle marketing and slaughter in the first half of the year.

Oklahoma State University Extension livestock marketing specialist Derrell Peel noted that total cattle slaughter in 2018 was up 2.5% year over year, with steer slaughter down 0.7% from 2017 and heifer slaughter up 6.5% year over year. Total cow slaughter was up 6.8%, with dairy cow slaughter up 5.1% and beef cow slaughter up 8.6% year over year. Beef cow slaughter represented 9.5% of the herd inventory; a culling rate just equal to the long-term average. Bull slaughter was down 0.4% year over year and calf (veal) slaughter was up 13.5% from 2017.

At the Cattle Industry Convention in January, the CattleFax consulting firm presented its outlook and market facts. Among the predictions, it was noted that beef production should rise 1.6% in 2019, accounting for 27.4 billion. The analysts also pointed out that herd expansion has been under way since 2014 with 6.5 million more beef cattle in the past five years. The beef cow herd added three million head, there were two million more feeder cattle and calves outside feed yards, and 1.5 million cattle on feed. That said, they highlighted the slowing rate of expansion, with 510,000 more beef cows added in 2018. There are 180,000 cows projected to be added in 2019 and another 100,000 could be added in 2020. By 2021, the rate of expansion is expected to be flat. Lastly, they noted that total slaughter, including cull cattle, is anticipated to rise 1.4%, with 33.5 million head in 2019.

US export sales data made available that closes out the 2018 reporting year showed that accumulated exports of hides in 2018 totalled 21.457 million pieces, up less than 1% from the prior year’s total of 21.390 million pieces. For wet-blue, accumulated exports in 2018 totalled 6.976 million, up 1% from the prior year’s total of 6.927 million wet-blues. Surprisingly, exports of splits were up significantly in 2018; accumulated exports of splits totalled 25,103lb, up 49% from the previous year’s 16,805lb.

China being the largest buyer of US hides, it is interesting to note that while the country imported fewer total hides in December 2018, the volume from the US increased. In December 2018, China imported 64.642 million kilograms of whole hides >16kg for a value of $77.195 million. This is a decrease of 11% in volume and 10% in value from the November totals.

Hides from the US in this category accounted for 34.040 million kilograms, or 53% of the total in volume. The December total imported from the US was up 13% in volume and 11% in value from October. Australia was the second-largest seller to China for whole hides >16kg and Canada was in third place.

For all of 2018, China decreased its imports of whole hides >16kg by 9.58% in volume and 29.39% in value. In the short term, there are no major factors poised to drive the market significantly up or down. Typically, there’s a run-up in the first quarter and a downturn in the second, which coincides with APLF. While the market is certainly firm compared to last year, demand is still not up to what it should be. Globally, supply is still plentiful, and there’s no shortage of offerings.

Moreover, trade with China hasn’t been settled but slaughter has slipped in the US and regular weight hides are well sold. Given these factors, it’s possible there will be a bump this year, although at the mid- February point many say it’s already happened.

Despite recent higher US hide prices, most industry experts are quick to point out that, overall, nothing has changed to alter the market fundamentals and the long-term outlook is of concern.