Don Ohsman's View from America

Being the benchmark selection for all steers, the decline in Texas caused butt brands to move down to $63.50 by the beginning of October with some trading taking place at $63. Branded steers, the second most voluminous selection after Texas, also fell during the same period. Prices that had been as high as $64 fob in August turned into sales right after Shanghai of $63.

By the last days of September, producers had to accept $62 from most origins to be able to generate much in the way of sales. Colorado steers, as usual, followed branded steers, declining in sympathy and trading a dollar below their branded steer brethren.

Automotive and, to a lesser extent, furniture upholstery tanners managed to push the price of heavy native steers down in consort with Texas. Prices as October began were down to $65, a full dollar below the previous month, and some sales were heard as low as $64.50.

Heavy native heifers, always in small supply, sold down to $57-$57.50 during the same period. Midwestern branded heifers sold sparingly but, in line with production, trading between $52.50-$53.50 depending on origin.

We found it interesting to observe that throughout the summer, the nation's major packers kept boasting about how well forward sold they were on their steers and that they didn't need to take lower prices. This may have been the case until the last days of September, when a hoped for pre-Shanghai round of trader buying failed to materialise.

The last chance for a pick up in business was a large demand from tanners at the Shanghai Fair, which also failed to materialise and, thus, came the resultant decline in prices.

The cow market continued to decline throughout the summer and into the early fall. Good packer fleshed branded cows had difficulty in finding buyers as low as $38-$39 and one large producer was forced to dump a quantity right after the Shanghai fair as low as $37. Heavy native cows found even less interest with a small volume moving in the area of $42 in the last days of September.

The one bright spot was Holstein dairy cows that found renewed interest in and around the Shanghai period. Sales were made in fairly good volume, albeit at prices between $45.50-$46 for good northern productions. Premium packer material traded at $48-$49 for the best grains and yielding hides.

At the lower end of the spectrum, mechanically flayed material from less desirable shipping points managed $42-$43. By the end of September, although not any stronger, this selection seemed to at least have found a temporary bottom.

Over weight kip had a good summer finding customers, largely in Europe but also in Asia and Mexico in the range of $46-$47 for 25/35 range provimi type skins. Sow skins remained strong, with keen demand pushing prices towards $15 at the Mexican border even though Asian buyers dropped out between $10-$12. Early this year, fleshed packer sow skins were selling for $8!

Small packers were essentially steady since our last view. Fleshed mostly native steer/heifers averaging between 58-62lb traded between $47-$49 depending on origin. In low grades, renderers, firsts and seconds were almost extinct over the hot weather months, but quantities of fleshed renderer thirds were available in a price range between $23-$25 depending on average and origin. China was the main consumer of this material but there was some Mexican participation as well.

Although supplies of bulls have been below normal levels all year, prices have remained on the low side again since our last report. Most native material traded, and not easily, between $52 and $53 fob while their branded brethren moved at $49-$51 depending on average and origin. Mexico and some Chinese buying supported the relatively small volumes available.

Meanwhile, supply was never a factor in the market movement in steers. There was the usual increase in meat consumption and, therefore, cattle slaughter in the last part of August, leading up to the peak meat eating period during the Labor Day holiday in the first week of September. The hide market ignored the numbers which is not uncommon. By the same token, and as is also normally the case, slaughter fell off in the post Labor Day period but this also had no effect on hide prices.

One reason tanners in Asia are unable to pay any more than the $68.50-$70.50 or so per piece c&f (including selling and documentation expenses) for heavy Texas and butts and a dollar less for branded steers is that they are restricted on what they can sell their leather for. At the same time prices for leather have remained stagnant, tanners' as well as shoe, handbag and furniture manufacturers' costs have risen due to increases in chemicals, freight etc.

On the other side of the equation, and as was brought out in a recent issue of the Hidenet European Market Report, huge international retailers such as Wal-Mart or Foot Locker or Payless are able to dictate to tanners, footwear manufacturers and major brands what they are willing to pay for their products. The same goes for furniture with major chains dominating the retail industry.

Typical prices of pu coated leathers have been between $0.95 cts and $1.25/sq ft for more than a year. TR corrected grain smooth shoe upper prices have also been steady for almost two years or so at about $1.70 sq/ft. This is the main factor that has caused heavy Texas, branded, Colorado and butt branded steers to hardly fluctuate during the same period.

There are only five major packers who produce about 80-85% of the American production and there are far more tanners and traders trying to buy them. This enables these producers to keep their prices up and only give ground sparingly. This also creates an essentially steady market that all can live with except the trading community that tries to make a living by squeezing in-between.

For these reasons, it is difficult to forecast any significant change in the narrow trading range in steers that has been with us for so long. Prices do move. Just last April, around the time of the Hong Kong fair, Texas traded between $61.50-$62 and branded steers a dollar lower. However, supply and demand are still fairly well in balance just as has been the case for almost two years. When prices get down to the $62 area for Texas, tanners' profit margins are such that they tend to step in and buy enough volume to push the market back up and the cycle starts all over again. We cannot foresee any significant change in this historical pattern for the rest of 2005.

Printer friendly version

Email this article to a friend