Lower kill, lower prices

16 May 2004

Despite the slightly more optimistic noises emanating from the leather industry at the moment, US hide prices still remain relatively static across most selections. Stable and even falling prices come at a time when the US slaughter figures are almost 10% down compared with last year. Normal market forces would predict the reverse. It would appear that a number of tanners are switching their raw material buying to lower grades in the hope of upgrading the material themselves. Brazilian, eastern European and Australian hide processors appear to have benefited by the downgrading. This is unsurprising after all the fashion business has been pushing patent, heavily corrected, embossed and printed leathers for forthcoming seasons. Tanners, looking to save costs, are opting for lower grades. At the end of the day, raw hides and skins are their greatest cost. The Hong Kong fair appeared to do little to improve US prices despite being a busy show. The ball does appear to be with the tanner at the moment. However, if the slaughter continues to remain low and the leather business picks-up, tanners could face much higher prices in the future. This is not anticipated to be the case over the next few weeks and months. The USDA has reported that head of cattle on feed at the beginning of April was 10.75 million which is slightly higher than a year ago but 7% lower than 2002. Placements into feedlots in March totalled 1.8 million which is 11% below last year and 8% lower than 2002. US Federal Inspected Slaughter for the four-week period to April 18 averaged 590,750 head compared with 646,750 over the same period last year. This is a fall of 9.1% or an average of 56,000 head per week. China was once again the largest buyer of US wet-salted hides taking 672,600 over the same four-week slot. South Korea was not far behind taking 611,700 hides. Taiwan took 228,400 and Hong Kong purchased 153,700. This gives a total figure of 1,054,700 head for the greater China region. Other significant buyers of US raw hides were Japan (146,200), Mexico (83,400), Thailand (57,500), Italy (49,400), Canada (29,400), Türkiye (12,400), Netherlands (7,800) and Indonesia (3,200). During the week ending April 18, buyers in Italy purchased 110,400 salted calf and kip skins and a further 18,200 went to Hong Kong. Interestingly, Indian buyers took 31,500 salted calfskins during the same week. Wet-blue sales averaged 129,175 pieces per week. Italy was the largest buyer taking more than 60,000 pieces in two out of the four weeks. China, South Korea, Thailand, Hong Kong and Indonesia also acquired significant quantities. Sales of wet-blue splits ended March and began April with decent export volumes of 1,199,120lb and 1,835,200lb respectively. They then fell away to 320-350,000lb for the middle two weeks of April. Mexico, Italy and Hong Kong were by far the most active in the market when it came to splits.

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