A view from America

This is not to say that some selections did not fluctuate in the meantime. Benchmark heavy Texas steers, after their poor showing in Hong Kong, succumbed to bids of $62 and even a rumoured $61.50 in the week following APLF. Equivalent prices on a c&f basis were at $66.50 or so depending on destination.

This brought buyers into the market as well as those covering shorts placed during tanner visits in the weeks preceding Hong Kong. At these levels, tanners found it reasonable to add to inventory as well. All of this translated into a market rebound towards late April, fuelled largely by trader positioning, more so than tanner buying.

This pick up in activity, according to some, managed to push the market up to $63 if not a few at $63.50 with aggressive c&f calculations by early May. As packers became more confident in the market, they resisted lower bids to the extent by that mid May, they were forced to retreat to $62 and $62.50 as even $63 became an impossibility. This translated to a top of $68.00 c&f or more normally $66.50-$67.50.

Branded steers, as usual, mirrored heavy Texas. With similar, if not even worse results during the Hong Kong fair, and below normal participation from Taiwan and China, the second largest market for this second largest production in America, prices slid in the post Hong Kong period and then reversed the trend as prices became too attractive. Offerings at $62 quickly translated into trades at $60-$60.50. However, once packers were again able to establish adequate forward positions, as in the case of Texas, prices rebounded to where bids at $62 were rejected against offers of $63 at mid May.

Heavy native steers vacillated between $64-$64.50. Heavy native heifers moved rather well at $55.50-$56.00 while branded heifers traded between $52-$52.75 from river points and at $55-$56 for southwestern productions.

As noted above, cow prices were also relatively steady since our last issue. Southwestern and western branded cows traded at $44 and up to $45 while more desirable origins or those with advantageous freight points to Asia managed $46-$47.

Holsteins continued to languish, as they have all year, with continuing declines in European cows discouraging tanners from buying American cows when Continental cows were more appealing. Typical prices for good processor/packer collections were at $49.50-$50.50 with anything more than $54.00-$55.00 c&f on Holsteins impossible to obtain except for the most premium productions.

A top of $63 on Texas and $62 on branded steers, both averaging 60/64lb, along with a bottom of $61.50 and $60.50, respectively, has been the turn around point in these two largest US selections since March. The first two months of the year weren't much different except that a little business was concluded about a dollar higher.

The branded steer and heavy natives butt and Colorado branded selections could have been fairly fluid for nearly a year in that prices always stray a little higher or a little lower, and then quickly return to seek their own middle level. The factor of a major trade show in Hong Kong, and the visit by US salespeople to virtually every tanner in Asia who uses American hides ultimately did not have any real effect on steer prices. The only factor that made any difference was trader positioning and, even then, the movement was only minimal at 1-2%.

A second factor that could have had some effect on hide prices has been the increased slaughter rate. Typically meat production and, therefore, hide supply increases in late April through late May as the Memorial Day and July 4th holiday's are two of three heaviest periods of meat consumption in the country.

This enabled packers to slaughter as many as 656,000 during the 2nd week of May, up from lows towards 550,000 just several weeks beforehand.

A third factor that should have influenced the market but did not, was the inability of the American government to get the border to open for live Canadian cattle. This restricted slaughter, even during the peak demand period, as high live prices translated into high retail prices that forced too many consumers to switch to pork or chicken on their holiday barbecues.

The Canadian government is doing all it can to promote increased slaughter capacity in their own country. In addition, they are helping the meat industry to promote exports in competition with US beef that cannot be shipped into Japan and Korea, the two largest and most lucrative markets for American packers. This means that those plants, mostly in the northwestern part of the US, have had substantial reductions in slaughter and their continued viability is now in question.

A fourth factor that could have influenced prices but has not, is the outstanding sales (sold but still to be shipped) position of America's hide exporters. Earlier sales of raw and wet-blue hides, still to be shipped, has risen from a normal average of about 3.5 million pieces in February and 3.8 million in March to about 4.2 million or so towards mid May, with little or no affect on hide prices.

Supply and demand used to dictate price movement of hides and all other commodities. It may still be the case in other industrial commodities. However, even with relatively substantial changes in producer forward sales numbers compared with tanner forward bought positions, the market still did not move more than 1-2%, and then, chiefly due to traders trying to get ahead of the price curve.

This leads us to conclude that there is one and only one factor that governs the price of hides. The price of leather is what determines the cost of the tanner's raw material and every slight fluctuation in raw and blue prices are primarily only caused by buyer/seller positions. We are unable to foresee any break out in the current price structure for some time to come.

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