Don Ohsman's view from America

Most participants traded fewer hides during the abbreviated fair than they would have had they stayed home. Speaking of staying home, not only exhibitors but, more importantly, buyers of American hides were conspicuous by their absence.

This wasn't because they didn't like to visit Hong Kong, nor due to the large expenses involved. It was due to the fact that their bellies were full of expensive US hides and many were not very interested in chasing suppliers to Hong Kong to buy more. This applied to the most voluminous selections of American production, heavy Texas and branded steers. The cow sector also failed to attract the interest it usually does but there was good demand seen from China for any kind of low grade material.

The absence of business in Hong Kong and in the weeks leading up to the fair and immediately after, finally brought home the realization to US producers that tanners, in Asia especially, had adequate inventories and were not ready to continue to buy hides at what had become the highest price levels in recent history. It wasn't that they were against setting any new records of how much they could pay, it was simply because there was no room between what leather has been selling for and Heavy Texas, butt branded and branded steers had come to cost them.

The result was that prices began to head south in early April as the much publicised over extended packer forward sales positions became more normal. Evidence of this was apparent in the USDA weekly reports of outstanding raw and wet-blue sales.

The total, which as of April 19 was at 4,339,300 pieces, was more than 18% below March 15 numbers. By comparison, in the second week of January this year, the outstanding total was 5,592,800 or close to 25% more than mid April.

To gain some perspective, at the peak of outstanding hide contracts yet to be shipped in May and June 2006, the total exceeded 6,500,000 pieces. This was when the market was surging higher. The difference between now and then is almost 50%.

These statistics illustrate why producers became more anxious to generate sales in April and were forced to gradually accept lower prices in order to reach their position goals.

This translated to heavy Texas selling from a peak of $77 in March down to $74-$74.50 by the last week of April. The best bids seen from Asia were at $78.50 c&f with normal destination and payment terms. Most bids were at $77.50 and $78 c&f.

Branded steers followed Texas in succumbing to bids as low as $73.50 as May began. Colorado steers fell to $72.

Trading in butt branded steers was less than active with domestic tanners taking their usual commitments but sellers still succumbed to bids at $75 before May began. As in the case of heavy Texas, buyers in Asia were no longer willing to pay $80 c&f which they did a short time before.

As brands fell, to the surprise of many, packers were able to resist lower tanner bids on heavy native steers and managed to trade all they had each week at $78. This is steady to levels paid since February. Export interest was moderate. Domestic automotive tanners continued to take up the bulk of packer's production, due in part to a change in the slaughter mix that produced a smaller percentage of non-branded hides compared to branded hides this spring.

Heifers were also not as weak as steers. Heavy native heifers sold at $68, down between $1-$1.50 from their peak in March. Supplies were limited which helped keep prices up.

Regardless of the softness in steers, both heavy native and branded cows managed to trade, albeit in relatively small numbers, at prices fairly steady since our last view. Eastern packer conventional natives traded at $55. Processor and packer fleshed heavy natives were reported at $59 but other sales were heard, depending on origin, between $55-$57.

In branded cows, offerings were scarce with most sellers sold far forward. River area brands moved in and around $52 and western and southwestern productions sold between $55-$58 depending on average and origin.

Interest in Holsteins was also fairly good. In late April fleshed dairy cows sold between $59-$60 but resistance was seen in Korea and China at anything over $63-$64 c&f except for the most premium productions. Holstein steers sold between $76-$78 during the period and in good quantity as well.

Bulls remained in tight supply by well forward producers. Prices actually firmed during the period after the APLF with natives bringing as high as $64 on 100/110lb averages.

In general, it could be said that heavier average fleshed small packer steer/heifers sold down about $1 since Hong Kong. Conventional steer/heifers that had a small brand percentage traded at $57 Laredo. Others sold in and around $58. Fleshed Midwestern natives with a small brand content sold between $59-$60 for the most part on 60/62lb.

Fleshed packer sows sold at $11-$11.50 Laredo depending on payment terms on average weights through most of April. In over-weight provimi type kip, offerings were seen at $62.50 c&f with trades generally steady on a market that continues to be firm.

Demand exceeded supply for most low grades with sellers turning down any bids that were not at or very close to their asking prices. Hair slip processor third's sold at $42-$43 c&f and conventional renderer thirds were recorded at $35 Laredo on heavy averages. Fleshed 1&2 renderers traded between $44-$45. Packer machine damaged thirds traded $56.50- $57.50 during the last week of the month.

Viewing the situation in the first days of May, we can only see more of the same or a continuation of the current trend in US hides. It may be after the fact, but outstanding totals are an important statistic to watch. As sellers' forward sold positions decline, tanner inventories do as well.

This is ok on the part of many tanners who have enough coverage until they should likely need to buy heavily again in June or July. However, as prices continue to drop, as we think they will, there should be 'bargain hunters' to take up enough of the production to at least slowdown the current market decline.

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