View from the US

The price of heavy Texas steers slipped lower in the second quarter, with seasonal weights dipping to a low of $23.00. There was little improvement in June, but some sales were reported up to $25.00 at the end of the month.

Colorados also saw prices slip, with 62/64lb selections selling at mainly $23.00 in May and June.

Interest in hides for the automotive sector died off significantly in the late spring and prices declined too. Although it picked up a bit in June, heavy native steers ended the month a few dollars lower at $32.00 to $33.00 for seasonal weights.

In the cow market, interest was healthy enough for sellers to develop good positions and keep prices steady. In fact, in late June, some cows added $0.50 to $1.00 to their prices. Still, demand for upholstery was not good enough and it was a challenge for sellers to maintain the status quo.

Exports

For the month of May, weekly rawhide sales averaged 464,720, which is 12% higher than the April average as well as the May 2022 figure. With regard to rawhide shipments, the May average was 409,500, 6% higher than in April but 5% lower than in May 2022.

Weekly wet-blue sales in May averaged 124,740, down by 11% from the April average and by 12% from the May 2022 number. May wet-blue shipments averaged 124,420. This is 14% higher than the April average but 15% lower than May 2022.

Feedlots

Cattle and calves on feed for the slaughter market in the US for feedlots with capacity of 1,000 or more head totalled 11.6 million head on 1 June 2023. The inventory was 3% below 1 June 2022. Placements in feedlots during May totalled 1.96 million head, 5% above 2022. Net placements were 1.88 million head. During May, placements of cattle and calves weighing less than 600lb were 380,000 head, 600–699lb were 295,000 head, 700–799lb were 480,000 head, 800–899lb were 505,000 head, 900–999lb were 215,000 head, and 1,000lb and greater were 80,000 head. Marketings of fed cattle during May totalled 1.95 million head, 2% above 2022. Other disappearance totalled 74,000 head during May, 3% below 2022.

Beef exports

In June, The USDA Economic Research Service slightly raised its beef production forecast for the year. It is expected to be to 27.1 billion pounds based on recent slaughter data and a faster pace of marketings expected later in the year.

Higher anticipated feeder cattle placements in third-quarter 2023 are expected to raise fed cattle marketings in early 2024, which minimally raises the beef production forecast next year to 24.8 billion pounds. The 2023 and 2024 cattle price forecasts are raised on firm demand.

At the same time, US cattle experts say that the drought has pushed beef cow herd liquidation and that this has made the beef industry smaller than it needs or planned to be. As soon as its possible, the market will have great incentive to rebuild the size of the US herd, they say.

This is important because 2022 saw a record culling of the beef herd. Already in 2023, liquidation is slowing, with beef cow slaughter down by 11.5% so far.

Hide market

Many sectors, including the hide market, breathed a sigh of relief in June when the International Longshore and Warehouse Union and the Pacific Maritime Association reached a tentative deal on a new six-year contract covering workers at all 29 West Coast ports.

Although the agreement had to be ratified by both parties, the outlook was good. Workers at ports along the entire West Coast had been working without a contract since July 2022 with negotiations dragging on for nearly 13 months.

With regard to sales during the second quarter, sellers had interest but most weeks it was not at price levels that they wanted to accept. As it happens whenever the market is bearish, there were plenty of stories about below-market sales cloaked in secrecy.

Many tales were apparently true because producers did indeed improve positions, allowing them to keep the market stable. However, that is as good as it got. In general, overall leather orders, especially for mass market footwear, were not at the levels they should be. Although US cattle slaughter was expected to decline, updated forecasts were a little higher. Good supply kept some selections under continued pressure.

Like most leather sectors, business for the automotive destination has not panned out as expected so far in 2023. In the early part of the year, it did a little better than anticipated in the North American market but that Q1 bump did not last into the second quarter.

Sources expected Q2 business to be flat or slightly decreased, which it appears to have been the case. Beyond that, most projections are flat for the rest of the year, especially in the US where economic conditions will continue to have an effect on demand.

Of course, the perspective you get on the auto leather market depends on who you ask. If a company happens to be producing leather for a model that turns out to be a hot seller, then the outlook is stronger than for those who are not.

In years past, the hide selections used for automobiles were generally the most stable and highly priced. They helped drive the strength of the overall market, but that may not be the case in 2023.

The cow sector had a rough spring, with prices again having approached the barely break-even point. Branded cows were at prices low enough that, in many cases, hides were sold to the gelatine market or processors were going to charge producers to pick them up. Fortunately, demand picked up a bit and sellers were able to stabilise the market.

When it comes to wet-blue, it was still being sold at a discount to cured hides. Global supplies are high everywhere and prices are low. In fact, in June, some US producers who typically turn heavy Texas hides into wet-blue opted to sell raw hides instead, given the poor demand and prices for wet-blue.

The bottom line for the industry is that China needs to get back on a better economic footing.

It’s not news that China’s economic recovery is sputtering. On top of this, the dollar/RMB exchange rate has made it more expensive for Chinese customers to buy US hides, even at the current cheap prices.

August will bring the usual Italian tannery closures and European vacation season – though substantial change doesn’t typically happen during this period. It’s difficult for most to pinpoint anything that will change enough to move the needle upward in the hide market over the next month or two.