View from the US15 May 2023
In January, the US hide market started to see prices stabilise after some difficulties at the end of December. By the time the Lunar New Year rolled around, the oversupply of some selections had been cleared and sellers started talking about being at the bottom of the trading range. That said, wet-blue was still under pressure due to customer inventories and footwear demand that was not yet healthy.
The price of heavy Texas steers slumped in late December and did not significantly improve through January. Seasonal weights were reported to sell as low as $22.00 but then some trading was also reported at $25.00. Colorados had slipped lower at the start of the year, with 62/64lb selections selling down to $21.00 and rebounding back to $23.00 by the end of January. After flagging in December, interest in hides for the automotive sector picked up, although prices had not yet followed. Heavy native steers were steady at $32.00. The cow sector held one of the bright spots at the start of 2023 and that was Holsteins. Both dairy cows and dairy steers saw good sales and managed to push prices a dollar or two higher. Both the higher-end premium selections as well as the medium quality hides sold well thanks to good upholstery business and a slight pick-up in handbag orders.
Export sales in 2022 were better than in 2021. For the fourth quarter, sales averaged 485,258, which is 22% higher than the third quarter and 17% over the Q4 average in 2021. For all of 2022, weekly rawhide sales averaged 414,200, which is 8% higher than in 2021. Shipments were also better. For Q4, weekly shipments averaged 462,475. This is 10% higher than the Q3 average and 19% higher than the Q4 average in 2021. For all of 2022, rawhide shipments averaged 424,542 – 11% higher than in 2021. With regard to wet-blue, sales improved in the last quarter and were a little better for the full year. For the fourth quarter, wet-blue sales averaged 158,300. This is 60% higher than the Q3 average but just 4% higher than the Q4 average in 2021. For all of 2022, weekly sales averaged 132,277, down by 4% from the 2021 average. For Q4, weekly wet-blue shipments averaged 122,217. This is 13% lower than in Q3 and 4% lower than in Q4 of 2021. For all of 2022, weekly wet-blue shipments averaged 134,985, which is 2% higher than the 2021 average.
Cattle and calves on feed for the slaughter market in the US for feedlots with capacity of 1,000 or more head totalled 11.7 million head on 1 January 2023. The inventory was 3% below 1 January 2022. The inventory included 7.03 million steers and steer calves, down 4% from the previous year. This group accounted for 60% of the total inventory. Heifers and heifer calves accounted for 4.65 million head, down 1% from 2022.
Placements in feedlots during December totalled 1.80 million head, 8% below 2021. Net placements were 1.75 million head. During December, placements of cattle and calves weighing less than 600lb were 455,000 head, 600–699lb were 435,000 head, 700–799lb were 415,000 head, 800–899lb were 304,000 head, 900–999lb were 105,000 head, and 1,000lb and greater were 90,000 head. Marketings of fed cattle during December totalled 1.74 million head, 6% below 2021. Other disappearance totalled 54,000 head during December, unchanged from 2021.
Beef production for 2023
The USDA’s World Agricultural Supply and Demand Estimates (WASDE) revised China’s beef and pork imports upward for 2023. Global beef production for 2023 is virtually unchanged from the October forecast at 59.2 million tonnes. Global beef carcass prices eased entering 2023 – except for the US. Nevertheless, carcass prices among major exporters are still relatively high when compared with pre-pandemic levels, suggesting limited supplies and firm demand from key markets. Global beef exports for 2023 are virtually unchanged from the October forecast at 12.2 million tonnes. China imports are raised given the lifting of Covid-19 restrictions, which will strengthen HRI demand. Australia and Brazil are expected to gain market share due to lower exportable supplies in the US, Uruguay and Argentina. US imports are also raised as lower US beef production supports additional imports from Brazil and Australia.
Much the same as the second half of 2022, the US hide market started the year under a cloud of low demand. Steers were still lagging, although some firmer prices were being reported by the end of January. Volumes, however, were not large.
Rumours of high inventories and cut-rate deals persisted through the early weeks. This was not entirely surprising because the automotive sector was just starting to return to purchasing and footwear leather demand remained weak. Big shoe brands still had some sizeable inventories and customers who use a lot of wet-blue were still running about 30% below normal production due to low orders. Sources said that buyers expected the first half to remain challenging but predicted a second half with more typical volumes.
Of course, sales of wet-blue were not easy and reportedly took place at heavily discounted prices. While the second half of 2023 looks better from the footwear perspective, factories were still having to manage the current production environment, which was one of reduced orders. Manufacturers in China opted to close longer for the Chinese New Year holiday in an effort to avoid cutting staff. Moreover, the footwear sector was not unique: all types of manufacturing orders were lower than usual in China.
The bright spot in the US market during the first weeks of 2023 were Holsteins. Both dairy cows and particularly dairy steers enjoyed improved interest and, in some cases, slightly better prices. This was true for medium-quality selections as well as the high-end offers, thanks to better activity and expectations among Chinese upholstery tanners. In addition, at the end of January a little more purchasing was noted for the handbag market. Native cows also had some better interest, but low-end materials are still difficult to move. As buyers in China started leaving for the Lunar New Year holiday, activity in the hide market slowed down. Although business quickly died off ahead of the holiday, some sellers were betting that by the end of the week, some customers in China would start venturing back into the market. Indeed, some did. Part of this was probably because hide prices were still very attractive and not likely to go much lower, if at all.
Pushing prices higher in late January was a difficult task. Sellers tried, but most buyers responded with a resounding “no thanks”. Prices nonetheless had started to firm for a few selections. Auto leather tanners were ramping back up and purchasing more hides. Whether this was for refilling the pipeline or to meet better demand was still unclear. For 2023, US auto leather sources predicted stability to minor improvement for the first part of the year and perceptible increase in the automotive market for the second half. Elsewhere, western European automakers were expecting a “recessionary period” in the first half compared with the US car market being “tepidly optimistic”.
At press time, the US hide market was waiting to see what would happen after the Lunar New Year holiday. No one was expecting prices to rally, but more activity and some good positions could herald price increases on a number of selections. Some discussions indicated that the market was at or near the bottom of its trading range, and any optimistic indications from China with regard to consumption and orders would firm the market and move prices higher.
The period just after the Lunar New Year holiday was anticipated as a bellwether for the following couple of months. If Chinese customers returned to the market in force, it would indicate optimism and a return of orders.