View from the US

Benchmark heavy Texas steers saw sales pick up in May, although the price was down significantly by mid-month. Trading was taking place at $21–20 on seasonal weights of 62/64lb. Heavier weight material had also declined with levels sinking below $30 on selections over 72lb. Branded steers, or Colorados, also fell and were selling at the same level as Texas. All US steer selections were down in price in May.

The cow sector saw sales dry up, especially at the low end of the spectrum. Branded cows were at a price level where sellers could barely cover processing costs. Even then, bids were few and far between. The last reported sales of branded cows were at $5–6 on 52/54lb averages. Dairy cows also saw prices sink again to sell at $18–19 for an average variety.

With regard to US export sales, for most of the period, slaughter again outstripped combined sales, save for one week at 875,700 that some in the industry considered suspect. More attention is starting to be paid to slaughter and shipment figures than to sales. Resales are common and contracts have become viewed as an ‘option to buy’ instead of a solid agreement.

US hide export data through March indicated that cured cattle hide exports were down 10% in volume and 31% in value compared with the same period in 2018. With regard to wet-blue shipments, the total decreased 8% in volume and 6% in value. Italy was the largest buyer by value, totalling more than $37 million.

China reported that in March 2019 it imported 80.063 million kilos of whole hides >16kg for a value of $90.451 million. This is an increase of 47% in volume but a decrease of 6% in value from February 2019. Of this total, hides from the US in this category accounted for 38.497 million kilos or 48%. The value of these hides was $46.015 million, accounting for 51% of the total value. The average price per kilo was $1.20. The March total imported from the US was up 30% in volume and down 20% in value from February.

Early May saw some of the highest weekly slaughter totals to date, above the 670,000 mark. US agriculture exports noted that steer slaughter was up about 9% from mid-March to mid-April. The past year saw a relatively low level of steer slaughter. The cow herd and calf crop have continued to grow, but steer slaughter over the past year was 1.5% below the previous 52 weeks. So far, steer slaughter is about 2.7% below a year ago. Over time, steer slaughter should roughly match the growth in the calf crop.

One of the factors complicating the market in May was the renewed trade war between the US and China. Products exported from China before 10 May 2019 that entered the US prior to 1 June were subject to the 10% tariff. Products that enter the US on or after 1 June, regardless of the export date, will face a 25% tariff. Meanwhile, products exported from China after 10 May would also be subject to the 25% tariff.

The unthinkable

2019 has seen some very negative shifts in the market. The day that many thought would never come has arrived: some hides have absolutely no market. Reports started to surface of a cow processor that will no longer pick up or pay for the lowest-end branded cows. The same has been heard about some small packer dealers and collectors.

It is overkill to talk further about the need for increased demand as the route to an improved market. We all know that footwear’s use of leather has contracted far more than anyone could have anticipated. That said, and as the years have shown, the industry can’t wait for footwear to ‘come back’. It is going to require innovation by tanners and designers to come up with innovative processes to make leather a new and exciting material. Otherwise, more material will be at risk of being discarded.

The first and main issue is the continual destruction of leather demand on a global level. Next is the record-high slaughter. A couple of weeks ago, a packer said that 2019 slaughter numbers will be higher than last year, likely for the remainder of the year.

Some industry members are starting to consider realistically what will happen if a certain proportion of hides cannot be sold and must have an alternate route out of the warehouse. This is a problem because the rendering system is already taxed, leaving the landfill the only option. In years past, no one would have speculated that the market would be facing what it does today. Perfect storm coming? Maybe. As someone told us, “Today, I suppose anything is possible”.

US Market in Review

Hidenet‘s flagship report, established in 1975, covers the recent cowhide prices for all major selections. US industry news and market predictions for hide prices are also regular features.

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