Prices are on the up again

11 March 2010

The big gains were seen in the cow sector. Prices rose as much as 10% between the end of November and mid December. Heavy native cows sold up to $38 and $40 for the best quality northern productions.
Branded cows also did well after languishing between $18 and $22 for most of the fall. By the last days of November, however, prices paid went up to $30-$34 for the most favoured productions.
By the end of the second week of December, the tone changed on steers. If producers wanted to extend their somewhat eroding forward sales positions, they would have to take less money. As a result, we think that for the rest of December and into early January steers will do well to maintain steady levels. We will not be surprised to see incremental declines.
Cows were fully firm as we go to press and increases can be anticipated for the rest of December between $0.50 and $1.50 in the coming week on native and brands, along with continued firmness in Holsteins. As one informed source advised, US cows are still cheaper than comparable Brazilian material and tanners can use American cows for the same purpose.
After numerous conversations and email exchanges of late with major tanners, sales agents and footwear brands, all indications are that the price of steers have reached the top of the market.
Price points are the level where retailers can induce the public to buy their particular item, or today on their websites. Not only the Wal-Mart’s of the world, but smaller retailers know that if they put a pair of shoes on the display rack or table at a certain price, they can sell x units. If they price it higher, they will sell x minus and if it’s lower they will sell x plus. It’s the same for leather furniture, belts, wallets etc.
In other words, they know the price that will enable them to move product. This is why they put pressure on footwear brands, or for that matter, furniture or any other product makers, including automotive upholstery leather suppliers to keep prices down. They want to be able to sell a certain volume of whatever the product is.
This translates back to the cost of the raw material. This is why in the current economic
climate, if a Texas or branded steer exceeds $70 c&f, tanners cannot get enough money for their shoe upper leather to justify paying that much for their hides.
More and more brands are being forced into designing footwear and, yes, upholstery as well, with alternatives to full grain leathers made from US steer hides. This is why pu coated splits have been popular and continue to be in good demand for footwear and now there is the ‘bycast leather’ sofa.
The gain in Brazilian prices is another example and, of late, European and US cows. The grains aren’t really good enough, but with the chemicals and machinery available to tanners in this day and age, they can produce the proverbial ‘silk purse out of a sow’s ear’.
These factors are why we think that steer prices are now at the upper end of a trading range and will continue to be so for quite some time. They still have to be made into leather that can put the finished product on a retailer’s shelf at the price point that consumers will buy.



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