THE HIDE MARKET – MAY 21, 2018
Nothing new for the U.S Steer hide market last week, as it repeated its weekly trend. The Heavy Native Steer hide selection stayed basically steady, while all the branded Steer selections were down anywhere from $1.00 to $2.00 per piece FOB plant basis. The lack in demand, which is still blamed on reduced footwear orders, was the number one reason for the continued decline in U.S. hide prices. U.S. Cow hides did not fair much better than their Steer hide brethren, as we estimate Cows generally lost $1.00 in value last week. Pressure on U.S. Cow hide prices, which are already at historically low levels, is being affected not only by low shoe leather orders, but also by an abundance of competing raw materials from South America, Europe and Australia. On the bright side for U.S. hide producers, the current lower prices for their productions has brought buyers to the table who had been absent for some time. Also, our feeling is that a good number of hide sales were booked last week. However, the estimated U.S. Cattle slaughter number reported by the USDA for last week was the largest reported weekly number in over five years. So, did hide sales match production? That is debatable. The Export Sales and Export Shipment numbers reported last week by the USDA for U.S. Raw and Wet Blue hides were again, respectable, but indicate that they were not equal to production. The stronger U.S. dollar has not help U.S. hide prices either.
The following are our what we call the FOB plant market prices for the seasonal average weight Big Packer Steer hide selections:
- Heavy Native Steer hide $ 60.50 to $61.00 per piece, basically unchanged from our last week’s quote.
- Butt Branded Steer hide $51.00 per piece, which we will call down $1.00 from last week.
- Heavy Texas Steer hides $43.00 per piece, down $2.00 per piece from our last week’s quote.
The Export Sales Report released by the USDA on May 17, 2018, for the week ending Thursday May 14th. stated that a net 553,600 whole cattle hides, and wet blue equivalents were sold for export during that 7-day period. This number is down for the prior week’s reported 620,600 pieces sold. China was leading buyer, taking 218,900 pieces or about 40 percent of the total sales.
Federally Inspected Slaughter, (FIS), for the week ending Saturday May 19, 2018, was an estimated 660,000 cattle. Year to Date FIS for Cattle is an estimated 12,193,000 head up 2.8 percent from a year ago.
Hides are cheap. Current U.S. Raw and Wet Blue hide prices are at their lowest levels since 2009, when world economies were in a deep recession. Those prices must look attractive to tanners, as there is no question that tanners are making nice profits on the leathers they are now delivering. We expect tanners would love to sell more leather to take advantage of these profit margins. Of course, they will need to lower their leather prices to motivate their finished leather buyers to place orders, and we expect they will. With the per-head profit margins running as high as they are, we expect U.S. Beef packers to process as many cattle as they possibly can. But, with the limits on plant capacity and labor, we don’t think they can surpass last week’s slaughter number by much, if at all. Market needs a robust round of business to find its bottom. Although every tanner would like to buy at that bottom, very few will. The smart ones will take the current profits and follow the market lower if it moves so. We are, for sure, closer to the grounding of hide prices, and once prices hit bottom there will be the resulting bounce in prices. He who hesitates is lost.
It’s a lot easier to get up at 6:00 AM to play golf than at 10:00 AM to mow the lawn or go to church.
Golf appeals to the child in all of us. This is proven by our frequent inability to count past the number 5.