The December 4 ended sales reported by the United States Department of Agriculture (USDA) for hides and wet blue totalled 1,123, 000, exciting many traders. Some are convinced that this huge buy is a sign that the freefall is over. Other purveyors are not quite ready to declare an end, but think it is very near. Buyers certainly have an interest in taking advantage of unprecedented bargain prices. Recent drops in steer markets alone represent nearly $0.50-$0.70 a foot in reduced manufacturing costs.

Exports for the same week for hides and wet blue totalled 473,100, a big drop of 147,900 pieces under last week’s kill of 621,000. In order for the market to begin its healing process, the overhang of inventory will need to move at a more impressive rate than it is at present. It is critical that last week’s impressive sales figures translate to shipments. This is something that will be closely watched in the coming weeks as a sign of recovery.

Monday’s reported hide trading was minimal—not unusual for a Monday—but was firmer and higher compared with last week on some selections of steers and cows.

Everyone is asking whether we have finally reached the bottom of the hide market. The answer is almost. These past few months have been a harrowing trip for all of us—tanners and hide people alike. Each week of the journey found us hoping we were close to the bottom of the sinking hide market and that the nightmare would end. Well, there is an end to every journey, and the Quarterback is saying it is close.

Branded cow hides with values in the $9-$15 range FOB plant and Holstein dairy cow hides in the $18-$25 range have to be close to the bottom. How much lower can it go before packers simply say it is cheaper to dump the branded cow hides than to process and cure them? More importantly though, we are at a point where some tanners are looking at buying hides for storing and soaking later in 2009. In fact, quite a few hides were sold last week specifically to tanners doing just that.

Also, we have tanners in Europe (who have plenty of their own hides) looking to buy American hides. South American and Indian tanners who have never bought American hides before are suddenly interested and looking for offers. All this leads me to believe that, if we are not there yet, we are certainly close.

Steer hide values have also dropped, with most of the native, butt branded, and Heavy Texas selections selling today in the $30s FOB. It is hard to believe that prices have dropped so low from the highs of the mid $60s just a few weeks ago! So, the appropriate question on steer hides is how much lower can they go? Obviously, we are nowhere near a break-even price where it is a tossup whether to dump them or process them, and we will not even get close to that point. The fact is that tanners are facing leather buying demand cuts of somewhere between $0.30 and $0.50 a foot. Despite the drop, tanners can still make a profit tanning the cheaper hides and the feeling that these tanners will soon be in the market to cover needs is growing.

The USDA Hide Export Sales Report this past week certainly solidifies the bottom feeling some of us have, but one must remember that many of the million hides and wet blue sold were either re-sales or renegotiated contracts. We must also bear in mind that many packers and processors still have large inventories of hides that have to be assimilated before we can say with certainty that the market has stopped going down. We are faced with competing productions in Europe and South America that have huge inventories of hides and wet blue still unsold and are looking at shipping delays due to the upcoming holidays. So, we must temper our “bottom” feelings with the reality that it is still ugly out there.

Share this story: