A view from America

The small number of exhibiting US tanners enjoyed fairly decent sampling interest but are always concerned if buyer interest is more to copy innovative creations or really give future orders.

The trend of Asian tanners, who for decades had relied on a steady diet of US branded material to operate their business, has evaporated. In the ever competitive world of retailers selling footwear and upholstery, a continual search to meet lower price points drives manufacturers to find cheaper raw material.

To match this consumer demand, a sizeable percentage of manufacturer leather demand has switched from full grain A&B grades, to lower and correctable C/D grades. This has forced tanners to source lower priced raw material.

Improved tanning methods and innovations from the chemicals industry, have enabled tanners in Asia and elsewhere to turn hides that should produce leather that previously would have been unacceptable, into mainstream finished products. This then becomes fashionable, readily acceptable finished goods, at lower prices that create more sales for retailers.

This is not to say that heavy Texas steer hides failed to develop any buyer interest. On the contrary, major packers, after having dismal results in trying to generate sales during the week or two before Hong Kong, were ready to deal. However, tanners generally refrained, sensing both lower prices shortly and relying on their adequate inventories to wait for lower prices still.

Bids were few and far between, with traders carrying long positions grabbing what business could be concluded at $68 to $68.50 c&f. By the last full day of the show, packers finally gave in to bids of $63 and $63.50, down as much as $2 from original asking prices.

Returning home from a discouraging trip, even those who visited tanners after the fair, were unable to improve their sales volume. This caused prices to fall to $62 by the second week of April, with some business being concluded by traders as low as $61 by mid-month, or between $66.50 and $67 c&f.

Butt branded steers often traded on a par with Texas but heavy native steers, seeing little support from reduced soaks at America's big three automotive tanners, struggled to maintain minimal price premiums.

Sales took place at $65 in and around the time of the APLF but succumbed to bids as low as $63-$64 by mid-April. Branded steers traded within a dollar or two of Texas and Colorado's at least a dollar if not two dollars below branded steers.

Cows fared pretty well at the APLF as well as subsequently. Fleshed branded cows moved from $41-$42 to as high as $44-$45 in the weeks following the fair.

Fleshed Holstein cows advanced to as high as $54-$55 early in April but lost ground to lower cost European material of similar quality at much lower prices. Well sold producer forward positions were the main factor that kept prices from retreating by mid-April.

Small packers and low grades were quiet, based both on Easter Holiday closings in Europe but more so in Mexico and lacklustre Asian interest for these selections in the first half of the month. Bulls were one of the few bright spots with a few Asian tanners picking up what is always a limited American production.

This pushed prices of native bulls averaging between 100-110lb to move up to as high as $56-$57 fob, with their branded brethren trading as high as $52 to even $53 from advantageous freight points.

As the price of Texas steers go, so goes the American hide market. It is apparent, at least to this writer, that this most voluminously produced US selection has lost its lustre. If Texas prices decline, so do butt branded and branded as well as Colorado branded steers.

Heifers are also influenced by Texas price levels and, to a lesser degree, cows of all types. The gradual decline in steer prices seen during the past three months looks like it has further to go. This is regardless of record low slaughter, week in and week out, that is pegged to rise sharply in May and June.

Demand always has and always will drive leather and resultant hide prices. At present, demand has fallen for US steers as a percentage of tanners raw material needs. We do not look for this trend to reverse itself until American prices fall to a point where it is competitive to other sources that generate inferior quality raw stock.

However, markets do not move in a single direction forever. Between mid-February and mid-April, approximately 1,000,000 more hides have been reported sold according to USDA calculations and estimated domestic tanner soaks than have been produced by packers. At least for now, even this statistical imbalance has failed to halt the decline.

Ultimately, prices should at least stabilise. However, the trade is now entering the slowest leather selling season of the year which will coincide with the largest months of American hide supply. Hidenet statistics show that Texas steers, from an historical perspective, are still dear. Bullish anyone?

Don Ohsman

Hidenet.com

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