Tanners really bowed their necks last week refusing to pay U.S. hide and wet blue suppliers their asking prices, even though asking prices were essentially unchanged from the week prior. Tanners reiterated what they had been saying for some time, that the leather business does not justify the higher hide prices being paid in the market. They said that leather orders are not comparable with a year ago, neither in volume nor price level. The split market continues to be weak and the currency exchange rates last week were a problem, especially for the Chinese. In any case, U.S. Steer hide business hit a wall last week, a fact made clear by both reduced sales volume for raw and wet blues and reduced sale prices. The U.S. Federally Inspected Slaughter (FIS) for cattle last week came in at just below 600,000 head, which is just a little below the high for the year that was reported for the previous week and at the high end of what we can expect for a weekly slaughter number for the rest of this year. As for week’s end Big Packer and equivalent Steer hide values, we are going to call them down $1.00 for the week. That puts the FOB plant price for the seasonal-average Heavy Native Steer hides at $76.00, and the FOB plant price for Butt Br. Steer hides at between USD 74.00 to USD 75.00 per hide. The Heavy Texas Steer hide selection has been difficult to put a finger on because there was a wide range in reported sale prices last week. We are going to call the FOB plant price for the seasonal average Heavy Texas Steer hide between $71.00 and $72.00, but sales could have been made for more or less? Sales of U.S. Cow hides appeared, like Steer hides, to be limited last week with sale prices on all selections remaining mostly steady.
The Export Sales Report published by the USDA on June 30, 2016 covering sales made during the week ending June 23, 2016 stated that 587,700 hides and wet blue equivalents were sold for export during that 7 day period. This number is up from the prior week’s 511,000 pieces sold for export. China was the leading buyer with 319,600 pieces purchased. The second largest buyer was Italy, which booked 101,100 units of which all but 1,400 pieces were wet blue equivalents.
The Federally Inspected Slaughter (FIS) for the week ending Saturday July 2, 2016 was estimated to be 598,000 head of cattle. Down from the 611,000 head harvested the preceding week.
With this week being shortened by the July 4th holiday, we expect it will be a rather quiet week. On the negative side of the hide price battle between producers, sellers, and buyers, there were a couple of things that bear looking at. Late last week, there were reports that tanners in Taishan City, Guangdong province, China, were shut down by the government due to complaints by local residents of water and air pollution resulting from tannery operations. There were conflicting reports as to how long these tanners will be closed, but it sounded like it may take some time to get the effected tanners up and running again. That problem, and the fact that tanners in Asia continue to say U.S. Steer hide prices can’t go higher, but rather should move lower in light of current leather prices, and the lack of leather orders in general, we expect to weigh on the market. On the other hand, U.S hide suppliers contend that they remain well sold ahead and with the cattle slaughter number expected to decline somewhat as we head into the July/August “Dog Days of Summer”, they feel confident that hide prices to remain fairly steady. As for our thinking, we don’t expect much will change during this shortened work week. Sales of hides and wet blues will be limited and prices for all hides selections will remain, as they were last week, fairly steady to slightly lower.
Mulligan’s Laws
- There is no such thing as a friendly wager.
- Never leave your opponent with the sole responsibility for thinking of all the things that might go wrong with his shot.
