Last week was another week in which U.S. hide sellers reported booking a good volume of sales. We expect that some of these sales are resales or double selling of product that suppliers have on the books. These types of sales are the result of delayed L/C openings from buyers or in some cases contract cancellations. Prices were off again but those reduced prices also appear to have brought more buyers as well as new buyers into the U.S. market. Yes, the problems hide suppliers are having with some tanners in China and Korea, who do not live up to their contractual commitments, continued last week. Those problems have put hide suppliers, some more than others, in difficult positions. Some tanners in China and Korea, before they will open their L/Cs on outstanding contracts, are insisting that suppliers sell them hides at lower price levels allowing them to average down the cost on their outstanding contracts. Therefore, it is still hard to put what could be called the market price on just about any hide selection. At the close of business on Friday of last week, we would quote the value of Big Packer hides as follows; Heavy Native Steer hides between $74.00 and $76.00 per hide, Butt Branded Steer hides between $72.00 and $74.00 per hide, and Heavy Texas Steer hides at $62.00 to $70.00 per hide, all prices FOB plant. Cow hide sales seem to have improved somewhat last week. Again as prices drifted lower, more buyers who were not seen in the market for some time, entered the market for the various Cow hide selections.
The Export Sales Report released by the USDA on July 9, 2015 for sales made during the week ending July 2, 2015, showed that 679,800 cattle hides and wet blue equivalents were sold for export. This number is bigger than many expected and it follows the previous week’s reported sales number of 641,300 pieces sold. This was also a large quantity of hides. China purchased 368,100 units or 54 percent of the total sales.
The Federally Inspected Slaughter (FIS) for the week ending Saturday July 11, 2015 was estimated to be 551,000 cattle, down from the previous holiday shortened week’s estimated FIS of 521,000 head. The FIS for that same week last year was 579,183 animals. YTD: FIS is off 6.9 percent or 1,106,000 head from a year ago.
The volume of hide sales that have been reported sold over the last few weeks indicates that suppliers have improved their sold ahead positions. The question is, have packers and dealers sold enough product including hides and wet blue, to allow them to turn down lower price bids and orders from buyers? If so, then a bottom will be put in the market. Slaughter in the U.S. is expected to decline further as we move through the “Dog Days” of the summer. The weekly supply of U.S. hides will remain well below a year ago numbers. The reports from around the world indicate that hide supplies internationally will also be lower going forward. Leather business should improve as it normally does, as we move toward the fall. It has to be expected that because of the decline in hide prices, leather prices will also retreat resulting in an increase in the demand for leather. We can’t imagine that leather prices will drop in proportion to the recent drop in hide prices, so tanners should be in a good position. The market may have further to decline, but every day we are getting closer to the bottom in hide prices. Hope, for all involved in the hide and leather business, that the bottom comes sooner rather than later.
A lot of guys, who have never choked, have never been in the position to do so. – Tom Watson
U.S. Opens are won with guts and pars. – Curtis Strange