There was a good deal of interest in U.S. hides last week, and that interest developed in to a fair amount of business being put together. To get the job done, U.S. hide suppliers had to accept prices that were $1.00 to $3.00 per hide less than their previous sales levels, depending on the selection and origin. The week started with asking prices that were down from the previous week’s asking price, but still higher than their sales levels. After a good deal of back and forth, tanners and suppliers finally came to agreements on price that were acceptable to both. Did suppliers sell a week’s production last week? Maybe, but it’s hard to say for sure. Tanners in China continued to mention that the lack of orders from their domestic shoe makers was a concern and was effecting both their cash flow and their willingness to purchase raw material. The news of more pressure being put on the Chinese tanners in various tanning areas to further their improvement of the effluent cleanup also put a damper on the purchasing of raw hides. Adding pessimism to the market were ongoing rumors regarding large U.S. producers selling large blocks of hides to some of the tanners at deeply discounted levels. Cattle slaughter in the U.S. was just above the 600,000 level, which was the result of decent business for U.S. beef packers. Packers would be making more money because of good beef demand for both domestic and export consumption, but the cattle supply remains tight keeping fat cattle prices higher than expected. At the close of business last Friday, we are going to call the FOB plant price for U.S. Big Packer Native Steer hide to be between $67.00 and $68.00 per piece. That leaves the Butt Branded Steer hide selection at $66.00 FOB plant. The Big Packer Heavy Texas Steer hide selection was reported to have sold in a broad range, but if we throw out both the high end and low end reports, we come up with an FOB plant value of $62.00 to $64.00 per piece. Many estimate that U.S. Cow hide prices have taken more of a beating than Steer hides recently. Although, last week we did not hear of any Cow hide sale where the supplier took off more than $2.00 from their previous sales level, for any selection or production.
The Export Sales Report released by the USDA on May 11, 2017 showed net sales of 506,600 U.S. cattle hides and wet blue equivalents to have been sold for export during the 7-day period ending Thursday May 4, 2017. This number is down about 30 percent from the 717,800 pieces reported as sold for export the prior week. China was in the top buyer spot for the week with a reported 267,600 pieces purchased and Korea was the second largest buyer, taking 115,600 units of all raw hides.
The Federally Inspected Slaughter (FIS) for the week ending Saturday May 13, 2017 was an estimated 609,000 cattle. That number was less than the 612,000 head processed the previous week. For the same period, last year, the FIS was 598,000 head. Year-to-Date FIS is up 613,000 head or 5.8 percent from a year ago.
We are closer to grounding U.S. hide and wet blue prices today than we were a week ago, but are we there yet? We can’t say with much confidence that we are. The push still must come from the demand side. U.S. cattle slaughter is not going to bring us any surprises. It’s going to remain at a decent level for now, above 600,000 head, but nothing crazy. We don’t believe that tanners have a lot of raw hide inventory, so they will be watching the market closely. When suppliers feel strong enough to sit out for a week and not cave to lower bids, buyers that enter the market will put the bottom in it and prices, as always, will jump higher.
Golf Wisdom
“One thing about golf is you don’t know why you play bad and why you play good.”
– George Archer
“Golf is like love. One day you think you are too old, and the next day you want to do it again.”
– Roberto De Vicenzo
