Don Ohsman's view from America

What business that did take place was at levels on a par with previous sales. In general, both buyers and sellers seemed content to be in a holiday slowdown mode.

Benchmark heavy Texas steer sales were about normal for the first ten days of the month but, as is usually the case, tapered off to almost nothing during the last two weeks of December. Typically, producers were not actively seeking new sales unless increases could be obtained and buyers had little if any appetite to do so.

Bids in some volume were seen between $77.50-78.50 c&f but sellers were not even interested at $80, a level at which tanners were very hesitant to pay.

Interest in butt branded steers was fairly good but sellers had difficulty in getting anything over $73.50. One well sold producer turned down $73 and in another case, a bid at $80 c&f was passed by another packer at mid month.

Regardless of the incongruity of non branded and branded material selling at the same price, producers of heavy natives were unable to persuade buyers to go over $74. Some sales took place for export on an fob basis of $73.50 and good processor steers sold at $73.

In the cow sector, good fleshed Holsteins traded in comparatively small volume throughout the period between $56-56.50 for the most part. Other processor Holstein cows sold between $53-53.50. Several lots of fleshed Holstein steers traded at $73, steady with last reported sales.

Several producers sold heavy native cows in relatively good volume into Asia at $58.50 c&f with extended payment terms. Conventional packer material was bid at $51 and countered at $52. One producer sold his collection at $51.50 with some brand content. Conventional packer heavy native cows were bid at $51, and countered at $52 with a large volume trading just before Christmas time at $52-$53 depending on origin and average. Processor fleshed branded cows were reported as low as $43 but others traded at $47-47.50, depending on origin and average. The best northern varieties were offered at $50.

During the second week of the month, the Immigration and Customs Enforcement arm of the Department of Homeland Security arrested 1,282 workers at six Swift & Co meatpacking plants in six states. The majority of immigrant workers were charged administratively with being in the country without legal documentation.

About 65 face criminal charges, including an undisclosed number for identity theft. Government officials commented that action against other meat industry employers is a possibility. One official said that Swift was singled out because there appeared to be a 'large concentration' of workers using documents obtained from a ring of identity thieves working at Swift plants.

ICE said in a statement that Swift itself is not being targeted, but that hundreds of Swift employees are. Press reports from local newspapers said that hundreds of agents arrived at each plant and illegal aliens were found with

legitimate US birth certificates and other forms of identification. ICE has been investigating the identity theft ring since February.

J Patrick Boyle, president of the American Meat Institute, said in a statement that the Swift raids

'illustrate a fundamental dilemma faced by employers nationwide: verifying employment in a manner that ensures that employees are eligible to work in the United States, while also protecting the civil rights of foreign-born people.'

Illustrating Boyle's point, in 2002 Swift settled a complaint that they were targeting Hispanics at one of their plants by asking job applicants for additional documentation. 'If an employer accepts documents that turn out to be fraudulent, they may face federal penalties', Boyle noted. 'If an employer questions documents that are legitimate, the employer can face civil rights charges.' An ICE spokesperson said that the raids on Swift were 'just today's' actions and further steps may be taken against other companies in the near future.

On the political front, just prior to its holiday adjournment, Congress approved a package of trade measures that are critical for the US apparel, footwear and textile industries. AAFA president Burke said: 'The legislation includes a conditional one-year extension of the Andean trade preference programme, originally set to expire at the end of this year.'

Further, the legislation includes temporary duty reductions or suspensions on US imports of a wide variety of footwear, textiles and clothing. The package also includes new trade preferences for apparel made in Haiti and an extension of the third-country fabric provisions under the African Growth and Opportunity Act (AGOA) until 2012. Finally, the legislation includes a provision extending the Generalized System of Preferences (GSP) programme for two years and a provision that grants Vietnam Permanent Normal Trade Relations (PNTR) status.

The government also released some interesting statistics pertaining to the still alive, albeit a fraction of its former self, American footwear manufacturing industry. October US total footwear manufacturing employment increased for the first time in five months. 1.9% more workers were employed than during the previous month. The total of 16,400 employees is still 8.4% lower than in October 2005 however. And, finally, the National Basketball Association announced that they would switch back to a leather ball.

With respect to the market outlook for January, price increases on leather are set to be the largest in many years as tanners need to 'catch up' after having seen the cost of their raw material rise 15% since January 2006, and more than 8% since the Shanghai Leather Fair. Shoe manufacturers, thanks in part to Hidenet market reports, are well aware of this situation. Major brands with whom we have spoken are considering increases between 15 and 25 cts/sq ft on shoe upper leathers and 10-15 cts/sq ft in many cases for furniture upholstery leather. As a point of reference, 10 cts/sq ft on leather equals approximately $5/hide.

This does not mean that higher leather prices will assure higher hide prices. The majority of the increase will only enable tanners to catch up from break even calculations that were in and around $73-$74 c&f in September. By comparison, it's difficult for tanners in Asia to buy steers today for as much as $80 c&f. This is not to mention the ongoing increased costs in chemicals, equipment, taxes etc. However, it will keep their drums turning and remain solvent. For tanners customers, it will mean adherence to delivery and quality commitments.

Our expectations are to see prices remain firm in January and perhaps February as well. Although major steer producers did not sell in any large volume, especially in the last half of December, we feel that tanners lack of participation, commensurate with packer sales, should create a pent up demand amongst both buyers and sellers that is likely to come to the fore in the second or third week of January. This is likely to create a large round of business that is destined, at least in our view to sustain if not advance current price levels.

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