THE HIDE MARKET – FEBRUARY 20, 2017
Trading in the U.S. Steer hide market was not robust last week. We expected Asian tanner to be active buyers last week, but that was not the case. The information we got from China and Korea was that tanners in both countries were in the process finalizing some leather orders, but prices and quantity of those orders were still up in the air. Without knowing those most-important details, tanners were not in a position to enter the raw material market to cover these yet-to-be leather orders. Well, despite the absence in the market of some big customers for U.S. hides suppliers of U.S. Plump (Beef Type), Steer hides were able to get $1.00 up on all their selections last week. These increases, we believe, were the result of steady buyer interest for Heavy Native Steer hides and the reduction in the production of this selection. Meaning there has recently been a reduction in the percentage of Native Steer hides in the production. This lack of availability of the Native Steer hides has forced buyers, who prefer Heavy Native Steer hides, into the market for the Butt Branded Steer hide selection. This in turn pushed the market price for the Butts up $1.00 per piece in step with the increase in the value of Heavy Native Steer hide selection. Last week’s cattle slaughter number came in well under the 600,000 number again, as U.S. beef packers continued to struggle with profitability. One would think that these lower-than-expected U.S. slaughter numbers might have had an upward effect on hide prices. But, these slaughter numbers were countered by the lower export sales numbers for hides and wet blue equivalents that were report by the USDA over the same period of time. The result being that these two numbers neutralized each other. So, as we mentioned above, we did not see the amount of buyer interest we expected to see for U.S. hides last week. But, we did see that sellers of U.S. Heavy Native and Butt Branded Steer hides were able to get, on an average, price increases of $1.00 per piece on the hides they did sell. Therefore, we are raising what we see as the value of the seasonal average weight U.S. Big Packer Heavy Native Steer hide to $78.00 per piece FOB plant. And, we are putting the value of the seasonal average weight U.S. Big Packer Butt Branded Steer hide up $76.00 per piece plant basis. For the seasonal average Big Packer Heavy Texas Steer hide selection we are leaving the FOB plant price unchanged at $71.00 per piece. Interest in U.S. Cow hides was also reduced last week, but as it was for the Steer hide selections, no supplier was forced to sell for less than their most recent sales price.
The USDA’s Export Sales Report released on February 16, 2017 showed net sales of 437,400 U.S. cattle hides and wet blue equivalents for the weekly period ending February 9, 2017. This was up about 33 percent from the 326,600 pieces reported to have sold for export the prior week. China was the biggest buyer during this period booking 262,900 or about 60 percent of the total units sold.
The Federally Inspected Slaughter (FIS) for the week ending Saturday February 18, 2017 was estimated to be 572,000 cattle. This number is down slightly from the estimated 577,000 head processed the prior week. For the same period, last year, the FIS came in at 547,215 head. The Year-to-date cattle slaughter is up by 3 percent over same period last year.
We expected last week to be a more active one for the U.S. hide market than it turned out to be. So, for this week we are doubling down. We feel that, because there has not been a good-sized week of sales put together for some time now that both suppliers and buyers need to put some business on their perspective books. As for hide prices we don’t expect any big surprises. We expect that there is a chance that sale prices could go up or down $1.00 or so on the Steer hide selections but we see no indication that U.S. Cow hide prices could move down at all, and instead are more likely to move slightly higher again because of demand. Please remember that we pride ourselves at being right about 50 percent of the time when we predict market activity and sale price expectations. Have a good week.
The stages of a golfer’s game are: Sudden Collapse, Radical Change, Complete Frustration, Slow Improvement, Brief Mastery, and Sudden Collapse.