US Perspective—21.09.10
21/09/2010
Courtesy of www.thejacobsen.com
The week turned out to be another classic stand-off in the hide market. After improving their positions over the past couple of weeks, suppliers increased prices which resulted in buyers backing off. Overall steer prices are up from last week.
In the trade, people are once again talking about the $80 mark, which this year has been a difficult barrier to overcome. Generally steer hides sell well at $77 and business drops off as prices edge closer to the elusive $80 mark. Unless something changes in the fundamentals in the leather business, hides will likely trade in a range between these two points for some time.
Trading was fairly quiet at the end of the week with a small number of packer and no processor sales reported. Prices were up but within the week’s trading levels. The Jacobsen Hide Index ended at $68.32, up over a dollar from the previous Friday. One supplier reported that $79 to $79.50 C&F Asia was the top price for steer hides and believes the steer market is about a dollar higher than last week.
Buyers were showing interest at the previous week’s levels, but facing price increases of around a dollar was dampening their appetites.
The large number of sales reported by suppliers toward the end of the fair in Shanghai showed up in the USDA Export Sales report for week ending September 9. For the week, combined whole hides and wet blue sales were 702,600 and total shipments were 649,800 pieces. Sales and shipment numbers for the week exceed this year’s weekly average of 564,344 for sales and 596,366 for shipments by 24.5% and 9% respectively.
Through week 36, this year’s slaughter is 23,201,000 or 644,472 cattle per week. Compared to the above average weekly sales and shipments of whole hides and wet blue, slaughter exceeds sales by just over 80,000 per week and shipments by 48,000.
A lot of people have tried to understand the large difference between slaughter, export sales, and shipments. In order to reconcile this difference, the domestic consumption of cattle hides needs to be included. For this illustration if we assume a fairly high 35,000 hides per week tanned in the US, there are still gaps to fill for both sales and shipments. Combining domestically tanned hides with export sales, the difference between slaughter and sales plus domestic use is 45,000 hides per week or around 1.6 million so far this year. Looking at shipments the same way, the difference is much closer to domestic production and sales at 18,000 weekly or 468,000 hides year to date.
Between the sales and shipment numbers a lot of people in the trade tend to pay more credence to the shipment numbers. These statistics are directly linked to physical inventory and once hides are shipped they usually do not come back. On the other hand, from week to week, sales numbers are almost always adjusted with many cancellations. Therefore, if we focus on the difference in the shipments and slaughter, the numbers would suggest either there is a small amount of inventory backing up or perhaps domestic production is greater than 35,000 hides per week.
At week 36, slaughter, sales and shipments in 2008 were 23,746,000, 22,560,800 and 22,987,400 respectively. The figures for 2009 were 22,835,000, 22,465,400 and 23,388,400. This year’s corresponding figures are 23,201,000, 20,316,395 and 21,469,200.
Recent reports on August retail sale are positive with sales increases up 0.6% excluding a decline in auto sales. This is a mixed bag for the leather industry but with the shoe segment’s larger role in US hide sales, it may be more positive than negative. This year shoe brands anticipated strong back-to-school sales and this may be a sign that sales are better than last year.
There is a lot depending on the outcome of retail shoe sales this fall. If sales are good and store shelves are emptied, brands will have a more positive outlook on next year’s production, which will mean greater leather and hide sales this winter.
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