Don Ohsman's view from America

Many side leather tanners admitted that they were interested in buying but not at prices demanded by producers and, only sparingly, with previous trading levels. All of this put a crimp on steer volume in the first half of September.

Producers of heavy Texas steers began the month by boosting asking prices in advance of Shanghai between $70-71 for shipment as far forward as January. Factoring in late autumn and winter shipments, averages ranged from 64 to as high as 68lb for regular productions. This translated to c&f prices surpassing $75 which discouraged buying and to some degree bidding. Producers all noted that at a dollar or two below current asking levels, large volumes could have been sold (isn't this usually the case?).

Some sales were recorded at $69 and up to $69.50 on 64/66lb averages. One producer countered $69.50 bids at $70 which was passed by the buyer. A small volume of sales were recorded during the Shanghai Fair of seasonal averages at $74 c&f. By mid-September, only $68.50 in any volume was obtainable on an fob basis and then in comparatively limited quantity.

Japanese bids on jumbo heavy Texas with 74lb minimum averages were bid at $73 but the producer held out for $75. Some tanners seeking the heaviest weights paid $72 fob for 68/70lb averages during the second week of the month.

As was the case in Texas, the volume accomplished in late August and early September for branded steers was minimal with considerably less being traded than produced. Major packer representatives as well as traders were traveling in Asia just prior to and after the Shanghai Fair and undoubtedly quietly sold reasonable volumes, below advertised levels. 64/66lb averages sold at $68 in Shanghai, up $0.50 from late August and one producer rejected a $68.50 bid on heavy averages for extended shipment and countered at $69 which was passed. Heavy average western branded steers were bid at $71 and countered at $73.

Throughout August, there was an unusual price disparity between butt branded and heavy Texas steers. Typically, they sell at the same or very similar prices but, in an anomaly, tanners chose not to pay the same for butt branded steers, even though shipments were sometimes months ahead of Texas.

This situation began to rectify itself in early September although without any large volume, butt branded steers moved $0.50 higher at $69. Sales in Asia were recorded as high as $73.50 c&f. Other butts traded at $68.50 fob. A sale was recorded in Shanghai at $73.50 c&f.

Heavy native steers remained firm in August and into September based on regular automotive tanner buying (mostly in wet-blue and on long-term contracts). Steers are proving more popular with Asian tanners than heavy Texas and, like butts, are more readily available. They found new customers in China and elsewhere which kept prices firm. Although attempts by major packers in early September to obtain $70.50 failed, the majority of better productions traded at $69.50 with unconfirmed reports of a premium production obtaining $69.75 and $70.

Regardless of fairly good buyer demand, the number of heifers sold and traded were minimal in early September. There were a few reports of heavy native heifers selling between $60-61 but nothing confirmed. Branded and heavy native cows were the stars in China.

After a good round of business in late August, both heavy native and branded cows strengthened. Heavy native cows offered between $51-54 depending on origin were snapped up during the first two days of the Shanghai Fair, leaving many producers sold out before week's end. Conventional packers sold at $53.

In branded cows, Southwestern packers averaging over 50lb moved easily at $43 and $43.50 depending on origin. Northern-fed branded cows were offered between $53 and $55 with regular productions finding interest between $45 and $46.

Dairy cows did not share in the demand seen on plump cows, perhaps due to asking prices by very well forward producers as much as buyer demand which appeared solid, albeit at a price. Some fleshed Holsteins sold at $57.50, steady at previous prices. Dairies from other origins were reported at $56 which was also on a par with previous sales. Holstein steers sold at $71.00.

Although there was not any dramatic increase in reported prices on bulls, both buyer demand and better forward sold positions by producers seemed more widespread. Bids at $52 on natives were countered at $53. Some Asian interest was seen at $63 c&f. Branded bulls were said to have traded at $48 but could not be confirmed while some sales did take place at $46 and $47 depending on origin and average.

As is now normal, the number of small packer hides changing hands has been limited. Conventional steer/heifers sold at $44 and $45 on 58/62lb average. Heavy native steer/heifers averaging 60/62lb traded at $54 and $54.50, up a dollar and more from a month ago.

The combined outstanding total of raw and wet-blue hides still to be shipped declined from 5,939,300 in early August compared with 5,861,200 in late July. This is down from the record setting 6,620,400 for the week ending June 15 but still high when compared with previous years. By the last week of August, total raw and wet-blue hides sold for export but still to be shipped (outstanding) totalled 5,516,300. This is up from 5,532,500 in mid-August but still higher than historical ranges. This trend is now in its tenth week. The huge forward sold positions of producers has been returning to more typical numbers in the area of 4.5 million as in previous years.

Forward producer sales positions continued to keep prices up as a majority of tanners who needed to buy only did so on a hand-to-mouth basis. Upholstery tanners, seemingly in greater need of raw material, bought whatever branded and native cows they could find at even close to realistic levels, pushing prices higher still. If major packers had not had comfortable forward positions in Texas and branded steers and needed to make sales, prices might have declined.

In our view, steers could be vulnerable if not in the second half of September then in early October as forward positions have to be eroding after comparatively slower sales in August and early September. What is unknown is how long can most tanners wait before buying, even in small quantities just to keep their drums turning. Given abnormally outstanding producer forward sales positions, it doesn't take much volume to keep prices firmly steady if not incrementally higher, at least for the near term.

How strong are steers? Heavy Texas steers have advanced 2.2% since late April and butts and natives even less. Branded steers are also only about 2.2% more than they were five months ago. This is in spite of most major packer forward sales positions being further extended than ever before. We can only conclude that without any increases in leather prices, (which are not expected at this time of year), we are most likely at the top of the price range on these selections. In our view, the lack of tanner support at or very close to seller asking prices in Shanghai confirms this opinion.

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