Rumors, Rumors and more Rumors- that is the best way to describe the U.S. hide market. Most of the rumors were regarding packer(s) voluminous sales to large tanners in Asia at prices that were more than a little below what most considered last week’s market prices. These rumors, along with the May Day and other holidays last week, did put a damper on the market and the number of U.S. raw and wet blue hides traded. From what we could tell, most of the Chinese tanners remained on the side lines last week, choosing to watch the market rather than be active buyers of U.S. raw material. Further, with the Korean tanners out of their offices for three National Holidays last week, things were not very exciting for U.S. raw and wet blue sellers. Most of the Asian tanners, particularly the Chinese shoe upper tanners, maintain that demand for their leathers and low split values have resulted in poor cash flow and a generally tough situation for them. Cattle slaughter in the U.S. was down from the week before, but still came in at over 600,000 head for the second week in a row. Cattle price went higher again last week, but so did wholesale beef prices, so both cattle feeder and packers continued to make nice profits. The USDA Export Sales report that was released last Thursday showed a robust sales number. We had mentioned in our last Monday’s market report that we felt that around a week’s production had been sold by suppliers during that reported period. But, we honestly did not expect the number that was reported. As for last week’s market prices for the U.S. hide selections we can say, with relative confidence, were down again by $1.00 to $2.00 per piece. So, that puts, in our opinion, the FOB plant value for the Big Packer Heavy Native Steer hide selection at $69.00 to $70.00 per piece and move the Butt Branded Steer hide selections value down to between $66.00 to $67.00 per piece. The cost of a Big Packer Heavy Texas Steer hide, because of rumors, is hard to get your arms around but we are going to call it $63.00 per hide plant basis. U.S. Cow hide values, also took a $1.00 to $2.00 per piece beating last week. Demand for Spready Cow hides has slowed more than the demand for the plump selections.
The Export Sales Report released by the USDA on May 4, 2017 showed net sales of 717,800 U.S. cattle hides and wet blue equivalents were sold for export during the 7-day period ending Thursday April 27, 2017. This number, is up considerably from the 605,000 pieces reported to have been traded for export the prior week. China was the leading buyer with a reported 308,200 pieces booked. Thailand, for the second week in a row, was the talk of the trade, as it was reported to have purchased 138,700 raw hides and wet blue equivalents, making it the second largest buyer for the week.
The Federally Inspected Slaughter (FIS) for the week ending Saturday May 6, 2017 was an estimated 612,000 cattle. That number was less than 624,000 head processed the previous week. For the same period, last year, the FIS was 586,388 head. Year-to-Date FIS is up 596,000 head or 5.9 percent from a year ago.
This week will be void of holidays, and those tanners who have been enjoying the recent holidays will be back for a full week’s work. Even if the recent rumors of some large volume sales to some of the bigger tanners are true, we feel the market still needs a good week of trading to put a bottom in the market. We all know from experience, markets don’t move in one direction. Although buyers in a down market want to buy at the bottom, in reality only a few sales are made at that price level. Once the bottom of a market is hit, it will bounce quickly higher. We expect that the U.S. cattle slaughter number this week will stay a little above the 600,000 level. But, we don’t really think that is a critical number for the hide market. It is leather demand that will put a bottom in the hide market and move hide prices higher.
Golf Truisms
A two-foot putt counts the same as a two-foot drive.
The practice green is either half as fast or twice as fast as all the other greens.
