Hidenet Publications Sample Reports

US Weekly Market Report Archive - 6/25/2010

Don Ohsman, Publisher

WEEK IN REVIEW

Packers offered far fewer steers than normal, and with one exception, steer prices were steady. Cows were easier with less than good demand. Over all it was a quiet week with a sense that more hides were produced than sold.

Heavy Texas up $1.00

The number of Texas steers changing hands this week appeared to be far fewer than normal. This was not necessarily due to any lack of demand, but more so due to very limited if any offerings by major producers. The first sales reported by Wednesday were at $74.00 and this price was maintained throughout the week, again, in limited volume. A few lots of jumbo Texas sold at $78.00 on minimum 70 lb. averages. Some trader business was heard to have taken place at $79.00 c&f, but packers typically rejected anything below $80.00 c&f net.

Branded steers steady

Prices of 60/62 lb. average branded steers remained steady with the highs of last week. Sales were made at $73.00 throughout the week, although as in the case of Texas, quantities appeared to be considerably less than normal. Better volume could have changed hands at a dollar or two less had their been any willing sellers and there were not. A sale or two of heavy western averages was seen at $75.00. Tanner attempts at $77.00 c&f net were rebuffed by sellers, and the highest price heard was at $79.00 c&f net.

Butts steady to softer

Volume in butt branded steers was diminished like other steer selections. Prices that reached a high of $74.00 did so again this week, but there were also some trades posted at $73.00, which would be down a dollar. There were not any export sales of butts reported.

Heavy native firmly steady

While not as keen as the previous week, demand for heavy native steers sold relatively easily at $75.00, which was steady to previous highs. Nearly all that were sold went to domestic automotive tanners who did not need to buy in enough quantity to push prices any higher

Heifers steady

Heifers appeared to be the most voluminously traded selection this week. Heavy natives sold in relatively good volume at both $64.00 and $65.00 depending on origin. Later in the period, a choice offering traded at $65.00. Branded heifers sold between $62.00 and $63.00 on the river and in the Panhandle area up to $64.50.

Plump cows easier

While there was an ample supply of cows offered onto the market this week, enough buyers were lacking. This resulted in a low volume of trades. Conventional natives were reported at $40.00 and processor heavy natives sold at $48.50; steady to the lows of last week but considerably below the top reached from a premium origin at $52.00 last week.

Branded cows sold in limited volume between a low of $37.00 in the west to a high of $41.00 from more northern points. $43.00 was bid in the Far East on 48/50 lb. brands

Holsteins steady

Reported trades were few in dairies this week. Northern type cows sold at $55.00, or in line with a week earlier, with offerings at $63.00 c&f not finding any buyer interest.

Skins quietly steady

Provimi type kip were another selection that was quiet. An offering of 25/35’s at $67.00 was seen but we were unable to confirm any sales. Both supply as well as demand remained limited. Fleshed packer sows were steady with most origins trading in and around $7.50 Laredo depending on average and origin.

Bulls firm

Native bulls sold at $55.00, or steady with last week but an unconfirmed report was heard of a sale at $57.00. Other natives with a sizeable Holstein content sold at $60.00. A sale of branded bulls was seen into Mexico at $53.50 delivered Laredo.

Small packers firmly steady

Fewer offerings were seen this week, but buyer interest was less than prevalent as well. 58/60 lb. natives were bid at $52.00 Laredo and passed by the producer. A bid at 49.00 fob on the same average but with a very small brand content was seen at $49.00 and countered. Processors reported difficulty in finding conventional accumulations.

Low grades soft

Increasing numbers of low grades were offered this week as tanners displayed little interest. While demand for better leather grades remains strong, there appears to be an abundance of lower grade material accumulating in many tanner inventories. Renderer no. 3’s were bid at $25.00 and countered at $29.00.

Splits

Mostly branded 15/+ kg whole hide drop splits were reported to have sold at $1.35 c&f. Others were offered at $1.40 and one packer reported a sale at $1.35/kg. c&f.

INDUSTRY NEWS

HIDENET announces new feature:

In our efforts to continually make Hidenet reports even more valuable than they already are, and in cooperation with Google, it is now possible to translate our English reports into just about any language you wish. Since we have readers in more than 50 foreign countries, we felt there was a need to make this service available to all.

On the upper right side of each report, you will see a dropdown box with ‘Select Language’ in it. Just click on the dropdown tab and select the language you wish and a translation of the report will appear.

In other words, if you wish to read the report in Italian, then select Italian from the dropdown box and the entire HIDENET website will appear in Italian. The same will happen for any language that you select.

To return to English, click ‘Show original’ or the ‘X’ at the top right of the screen.

Nike sales up

Nike Inc. reported sales grew 8% in the fourth quarter ended May 31, to $5.1 billion from $4.7 billion for the same period last year. Excluding changes in currency exchange rates, net revenues were up 4% compared to the same period last year

For the full year, sales fell 1% to $19.0 billion, compared to $19.2 billion last year. Excluding currency changes, net revenues were down 2% for the year. Fourth quarter net income increased 53% to $522 million

Finish line sales increase

The Finish Line, Inc. reported sales climbed 9.0% in its first quarter ended May 29, to $282.4 million from $259.1 million a year ago. Comps climbed 10.9% compared to a 3.9% decline for the same period a year ago. Income from continuing operations significantly improved to $13.7 million.

SRL to exit garment leathers

In a press release today, Shanghai Richina Leather Co (SRL) announced plans to cease ovine leather production operations effective Friday, September 3, 2010.

The SRL garment division produces lambskin leather from New Zealand and North African pelts primarily for the US and European premium leather jacket market. The division employs 310 workers.

According to Bob Moore, Shanghai Richina’s CEO, ‘SRL’s focus today is on building and growing our auto, footwear and accessories leather businesses. These operating groups, to be vertically aligned with SRL’s new Fuxin wet-blue production facility, will allow us to more effectively expand and grow our bovine business volumes and profitability.’

Shanghai Richina Leather is headquartered in Shanghai, China and produces automotive, footwear, accessories and garment leather for global brands including Toyota, Citroen, Peugeot, Cole Haan, Johnston and Murphy, Merrell, Clarks, Born, HH Brown, Sperry Topsider, Wolverine, Coach and others.

Chinese government starts to implement small tannery closings

During the first week of June, the Sichuan provincial government announced a plan to eliminate outdated production capacity in the province. Vice Governor Li Chenyun on behalf of provincial government signed a responsible agreement with 21 affiliated municipal governments on reaching the targets of backward production elimination. As per the agreement the tanneries with annual production less than 30,000 pieces of leather will be closed before the third quarter of this year.

Little ramifications seen so far of floating Yuan

China lowered its U.S. dollar central parity rate to 6.7980 yuan on Tuesday from 6.8275 yuan the previous day after allowing the local currency to sharply appreciate in the spot market on Monday. The lower dollar-yuan parity level comes in the wake of the central bank's decision over the weekend to remove the yuan's de-facto peg to the dollar.

On any given day, the central bank allows the U.S. dollar to move 0.5% in either direction from the central parity rate, while permitting a 3% move in other currencies versus the yuan. Among other currencies, the China Foreign Exchange Trade System set the euro parity for the day at 8.3816 yuan from 8.4825 yuan and the British pound parity at 10.0372 yuan from 10.1382 yuan.

The Chinese authorities allowed the renminbi to appreciate modestly on Monday in the first day of trading since the end of the near-two-year currency peg with the US dollar was announced.

However, in a follow-up statement on Sunday, it stressed that a substantial appreciation in the currency was “not in China’s interests” and that the exchange rate would remain “basically stable”.

Australian hide market

Figures received from Australia this week show that cattle hide prices rose 19% to $60.8 million between January and March compared with the same period in 2009, although this is still relatively low compared with prices prior to the global economic downturn. Hide exports fell 53% in volume during the first three months of the year to 1.9 million pieces. Adult cattle slaughter fell 6% to 1.8 million head.

USDA wants to change livestock sales regulations

The USDA announced a proposed rule this week that, if adopted, would result in sweeping changes to how livestock are marketed and procured by meat packers. The proposed rule, characterized by Agriculture Secretary Tom Vilsack as “aggressive,” was mandated by the 2008 Farm Bill.

EXPORTS

Click on chart to view underlying data.

Raw hides

Net sales of raw hides for the period ending June 17th totaled 292,200 pieces. This was 58% below last week and 38% under the previous four-week average. Destinations were:

Korea	101,300
China	54,600
Thailand	32,100
Vietnam	23,200
Taiwan	22,100
Japan	19,200
Hong Kong	14,500
Germany	10,800
Italy	7,500
Canada	1,900
Indonesia	1,600
Argentina	1,100
Holland	-0-	5,500 kip
France	-0-	4,100 kip

Weekly shipments against previous sales totaled 422,500 pieces. This was 20% below last week and 14% under the previous four-week average. Outstanding sales totaled 3,575,300 raw hides. This is down from last weeks 3,712,500 pieces but up slightly from 3,530,700 two weeks ago.

Wet blue

Net sales of wet blue hides for the period were 159,100. This was 23% over the previous four-week average. Destinations were:

China	77,600
Vietnam	39,600
Dom Rep	19,000
Mexico	17,200
Taiwan	4,700
Thailand	700

Weekly shipments were 141,800. Outstanding orders still to be filled totaled 592,400. This is up from 575,100 last week but lower than 635,700 two weeks ago.

Combined raw and wet blue exports down 2.7%

Click on chart to view underlying data.

The combined total of raw and wet blue outstanding for the period ending June 17th was 4,167,700 pieces. This is down from last weeks 4,287,600 but almost identical to the total two weeks ago, which was 4,166,400.

New raw/wet blue sales and shipments below slaughter

Click on chart to view underlying data.

Combined raw and wet blue new sales for the period totaled 451,300. Shipments were 564,300. Add in about 35,000 domestic consumption and the total is 599,300.

Meanwhile approximate slaughter for a similar time frame was 677,00 head. Therefore, both new sales and shipments were below slaughter, as they have been for most of the year.

Splits

Net sales of wet blue splits were 243,400 lbs. 193,800 lbs went to Korea, 25,800 lbs. to Indonesia and 23,800 lbs. to China. Shipments were 129,500 lbs. Outstanding sales totaled 2,274,500 lbs. This is up from 2,160,500 lbs. last week and 2,144,300 the week before that.

FORECAST

TALE OF THE SCALE

Supply and demand seem to be fairly well in balance this afternoon on steers. In cows, we think more need to be sold than there is interest to buy by tanners. Using only steers, the scale is in balance.

5.14.10
5.21.10
5.28.10
6.4.10
6.11.10

Our Tale of the Scale FORECAST is proven to be accurate more than 85% of the time!

FRIDAY AFTERNOON FACTOR

It is difficult to convince tanners to sell additional quantities of steers today, but it’s equally as hard to find bids, even at prices steady to last paid. As previously noted, major steer producers were reluctant to put themselves any further forward, but we doubt that they will retain this posture much longer. This leaves us to have a neutral to slightly bearish posture today.

In native and branded cows, quite simply, there are more to buy than there are bids and for this reason, we have a bearish bias on this sector.

How did we do?

In our forecast last week, we anticipated an increase in steer prices of a dollar. While we were right on Texas, we were wrong on the other selections. We did expect to see the cow sector steady, and in this area we were generally correct.

And for the coming week?

Hide market holding steady

As noted, major steer producers offered very few hides this week due to their well forward sold position. By the same token, buyers were not aggressive. While we think the need to buy still exists in greater than normal quantities, we feel that, as the saying goes, “the bloom is off the rose.”

We don’t think that there will be enough buyers wiling to pay anything over $80.00 c&f net, which calculates back to about $74.00 fob for any type of steers, with the exception of natives. By the same token, we sense that packers will not need to accept any bids that are below their last sales levels. This leads us to conclude that steer prices a week from now should be at about the same as they are today.

We sense that pressure is building again to a point on cows, that some declines are likely and we would not be surprised to see native and branded cows lose a dollar perhaps as well. In our opinion, all other selections will do well, to hold their own.

The economy and the hide market

Marketwatch reported that U.S. real gross domestic product for the first quarter was revised down to an increase of 2.7% annualized from the earlier estimate of a 3.0% rise, the Commerce Department said today. The revision to first-quarter GDP was largely due to weaker consumer spending and a widening trade deficit. Corporate profits increased a revised 8.0% quarter-to-quarter, compared with a 5.5% rise previously estimated.

More than a few of China’s very large furniture upholstery manufacturers (both leather and cloth) say their business is still very poor. As noted in our last issue of This week in leather the latest reports of existing and new home sales was lower in May

There are for more signs that some of the “boom” or recovery or whatever term one wishes to use is not as strong as it was earlier this year. Reports of large profit increases for public companies are not currently, nor are they apt to be as good in the third and fourth quarters of the year in too many cases.

Our take on this is that the depleted inventories are catching up as sales begin to slow after the catch up phase in the closet, shelf, and tannery. The stock market is reflecting this as well.

If, as we sense, the economic benefits of the re-stocking phase is now grinding to a halt, or at least slowing considerably, this would indicate that demand for leather products could slow as well.

So for the hide market?

Given the above, we could very well be at the top of the trading range. It’s quite possible that we’re getting to the point where if someone who deals in hides or leather would be better off in selling at the current market with the hope of covering those sales some weeks hen

SLAUGHTER

Click on chart to view underlying data.

Federally inspected slaughter for the week ending Saturday June 16 is estimated to be 667,000 head. Last week’s total was 667,000 and for the same period last year 670,000. Year-to-date slaughter is currently 1.9%, or 148,000 head below a year ago at this time.

QUOTES FOR SUCCESS:

"The person who gets the farthest is generally the one who is willing to do and dare. The sure-thing boat never gets far from shore." - Dale Carnegie

PRICE GUIDE

SELECTION	WEIGHT	PER PC FOB	LAST WEEK	LAST YEAR
Heavy Texas Steers	64-66	$74.00-75.00	$73.00-74.00	$38.00-39.00
Branded Steers	64-66	$73.00-74.00	$73.00-74.00	$34.00-35.00
Colorado Steers	64-66	$70.00-71.00 n	$70.00-71.00 n	$29.00-31.00
Butt Branded Steers	64-66	$73.00-74.00	$73.00-74.00	$36.00-37.00
Heavy Native Steers	64-66	$75.00-76.00	$74.00-75.00	$38.00-40.00
Heavy Native Heifers	50-52	$63.50-65.00	$63.50-65.00	$28.00-30.00
Branded Heifers	50-52	$62.50-64.00	$62.50-64.00	$25.00-27.00
Heavy Native Cows	50-52	$48.00-49.00	$49.00-52.00	$24.00-25.00
Branded Cows	50-52	$37.00-41.00	$40.00-41.00	$15.00-18.00
Spready Dairy Cows	50-52	$54.00-55.00	$54.00-55.00	$25.50-26.50
Over-weight Kip	20-35	$64.00-65.00	$64.00-65.00	$49.00-51.00
Native Bulls	95-105	$55.00-57.00	$54.00-56.00	$23.00-24.00

US Daily Market Report Archive - 7/20/2010

HEAVY TEXAS STEERS

Direct packer offerings on 60/64 lb. averages were seen in the Far East overnight at $82.00 c&f.

74 min average jumbo’s were offered by one producer at $79.00

A sale at $73.50 was posted, steady with last week.

BRANDED STEERS

60/62 lb. averages were bid at $70.00 and countered at $75.00

A bid at $68.00 on Colorado’s was countered at $71.00

66/68 lb. averages traded at $73.50

$72.50 was paid for 60/62 lb. averages.

HEAVY NATIVE STEERS

Several producers offered at $75.00 on 60/64 lb. averages today

HEIFERS

A bid at $62.00 on natives was countered at $65.00

A packer offering was seen at $69.00 c&f on natives

PLUMP COWS

Conventional packer native cows were reported having sold at $41.00

Brands in the west were bid at $37.00 and countered at $38.00 on heavy averages

Heavy natives were offered at $54.00 from a central origin.

HOLSTEINS

A better processor offered cows today at $56.00

A packer asked $57.00 on northern type productions.

SKINS

Heavier average fleshed packer sows sold at $8.00 Laredo

BULLS

Natives with a minimal brand content sold at $52.00

INDUSTRY NEWS

We regret to advise readers that the twin daughters of Boston Hide executive Anthony Andreottola accidently drowned Monday morning in a pool at their home. They were 2/1/2 years old. Veronica and Angelina Andreottola were granddaughters of Boston Hide & Fun founder Gerry Andreottola. Services are pending.

The USHSLA told members today that they have receivednotice from USDA's Animal and Plant Health Inspection Service (APHIS) regardingchangesbeing implemented to certificates used to export to the European Union.As you may know, APHIS has had a long-time policy of, prior to endorsement, transferring all certificates, other than the VS Form 16-4, to the letterhead of the APHIS office that actually endorses the certificate. This has created some complications for the EU certificates, which are generally formatted in such a way that it isvery difficult tomake them "fit" to the endorsingoffice letterhead

There is no EU requirement for certificates to be placed on endorsing office letterhead. As these certificates all contain a specific spot for the identity of the endorsing office to be noted, and as APHIS has now launched the special VS Paper for the certificates, APHIS has issued guidance to their endorsing offices to discontinue placing these EU certificates onto their office letterhead prior to endorsement.

Rather, the certificates will be printed by the endorsing office onto the special VS Paper prior to endorsement.

APHIS is confident that this change will result in facilitation of production and endorsement of crisper, more professional appearing certificates and facilitate the efforts which are likely to be necessary as the EU transitions to new certificates for a variety of commodities over the coming year.

Please contact me at jreddington@meatami.com with any specific questions or concerns.

MARKET OBSERVATIONS

Today’s trend: Struggling for steady

Offer lists seemed more extensive than even last week, and certainly more in late June. Producers were not bashful at their asking levels however.

Any bulls are conspicuous by their absence!

FEDERALLY INSPECTED SLAUGHTER

Today	130,000
Last week	131,000
Last year	127,000

Week to date	256,000
Last week	261,000
Last year	252,000

Monday’s slaughter included 101,000 steer/heifers and 25,000 cows and bulls

PRICE GUIDE

SELECTION	WEIGHT	PER PC FOB
Heavy Texas Steers	60-62	$72.50-73.50
Branded Steers	60-62	$71.50-72.50
Colorado Steers	60-62	$69.00-70.00
Butt Branded Steers	60-62	$71.50-72.50
Heavy Native Steers	60-62	$73.00-74.00
Heavy Native Heifers	48-50	$64.00-66.00
Branded Heifers	48-50	$63.00-64.00
Heavy Native Cows	50-52	$48.00-50.00
Branded Cows	48-50	$38.00-41.00
Spready Dairy Cows	48-50	$54.00-56.00
Over-weight Kip	20-35	$63.00-65.00
Native Bulls	90-100	$53.00-55.00

This Week in Leather Archive - 6/30/2010

Don Ohsman, Publisher

WEEK IN REVIEW

Our General News this week tells of emissions controls by the CLIA in China and the effort by the PTA in Pakistan to set government help in exports.

Economic News has several stories about conditions in the U.S.

Footwear has several detailed stories on not only the largest firms in the US, but in China and elsewhere as well.

Upholstery this week has an interesting story about car sales along with a discouraging report on Chinese furniture manufacturers business.

Several old established brands are expanding into the leather accessories business as can be seen in our Garment & Accessory section below.

Raw Material prices are generally steady, but to the dismay of tanners, at levels that are too high. Details and prices, as usual, can be seen in this section below.

GENERAL NEWS

1,000 Chinese tanners to close within 5 yrs

According to the secretary general of China Leather Industry Association Su Chaoying, during the twelfth five-year plan around 1,000 tanneries will be forced to shut down in order to achieve a reduction of 10% of COD and ammonia nitrogen compounds emissions.

Energy saving and emission reduction are the top concerns for China's leather industry as the drafted plan of the government's twelfth five-year plan will be announced next year.

By the end of this year the Ministry of Environment Protection will reveal the list of tanneries, which comply with the environmental protection standards, while the preparatory for survey conducted by the tanning self-regulation group is under way. The aim of announcing qualified tanneries is to promote cleaner production and update the technology in terms of pollution control.

Pakistan Tanners Assn asks govt for drawbacks

The Pakistani Tanners Association (PTA) asked the government to provide 6.3 percent duty drawback on export of finished leather in order to compete India, China and Bangladesh. Chairman PTA Gulzar Firoz, talking to Daily Times on Thursday said the government should also notify upward revision of duty drawback rates on export of finished leather for goat and sheep skins and cow and buffalo hides to make it realistic.

Firoz said the downward revision of such rates under SRO 210(1)/2009 of March 5, 2009 in supersession of its notification SRO 01(1)/2008 of January 1, 2008 has hit the leather industry hard. “First assess the implementation of the previous Trade Policy announced in July 2009 and particularly the Strategic Trade Policy Framework (STPF 2009-12) for three years”, he suggested.

PTA suggests formation of a joint committee of leather and articles thereof, textile and textile articles, carpets, sports goods and surgical goods to prepare a relief package and recommend to the Commerce Ministry for some basic and common incentives, that may be given to the five sectors, particularly in view of VAT being levied after 3 months. “The incentives announced for leather sector in the STPF have not been implemented besides proposals and suggestions of PTA discussed in the 61st meeting of the advisory council of the Ministry of Commerce on June 22, 2010 at Islamabad should also be considered.

Former chairman PTA, Agha Saiddain said present zero rating policy with reference to sales tax may be continued to save export industry from serious damage and to avoid further liquidity crunch.

“If VAT is levied on raw hides and skins it will be impossible to document the VAT because the suppliers of raw hides and skins are mostly butchers, traders and commission agents who are usually, neither educated nor are they affiliated with organized sectors and even they are not registered with the sales tax department”, Agha added. Duty free import of 5 percent of the FOB export value may be allowed for import of spare parts and accessories for leather and leather products. The authority to release fund from Ministry of Finance for the Export Investment Support Fund under STPF-2009-12 for matching grant for setting-up of effluent treatment plants and setting-up of labs in individual tanneries, he maintained.

ECONOMIC NEWS

American GDP down

U.S. real gross domestic product for the first quarter was revised down to an increase of 2.7% annualized from the earlier estimate of a 3.0% rise, the Commerce Department said Friday. Economists surveyed by MarketWatch expected first-quarter growth to be unrevised at up 3.0%. The revision to first-quarter GDP was largely due to weaker consumer spending and a widening trade deficit. A key measure of inflation was revised slightly higher but remained subdued. Core prices increased 0.7% in the first quarter, up from 0.6% reported earlier. Corporate profits increased a revised 8.0% quarter-to-quarter, compared with a 5.5% rise previously estimated.

The savings rate for U.S. households rose to the highest level in eight months in May, as incomes grew faster than spending, the Commerce Department estimated Monday.

Real (inflation-adjusted) spending increased a seasonally adjusted 0.3% in May after no gain in April, led by sizable increases in purchases of durable goods and services.

Real after-tax incomes rose 0.5% in May, compared with an upwardly revised 0.6% gain in disposable incomes in April. Compared with a year ago when tax cuts boosted household incomes, real disposable incomes are off 0.2%.

In nominal terms (not adjusted for price changes), incomes rose 0.4% in May while spending increased 0.2%. Read the full report on the Bureau of Economic Analysis website.

The report was mixed in terms of market expectations. Incomes rose less than the 0.5% expected, while spending was stronger than the 0.1% gain expected by economists surveyed by MarketWatch. See our complete economic calendar.

The savings rate rose to 4% from 3.8%. Households are saving three times as much out of their disposable incomes as they did just before the recession began in late 2007.

Consumer prices were unchanged in May, as measured by the personal consumption expenditure price index. Prices are up 1.9% compared with a year ago.

Core consumer prices -- which exclude volatile food and energy prices -- rose 0.2% in May and are up 1.3% in the past year.

The report shows Americans are slowly rebuilding their finances after the worst downturn in generations. Consumer spending is growing modestly, while inflation rates are very low.

April home prices higher than March

Home prices rose 0.8% in April compared with March in 20 major U.S. cities, according to the Case-Shiller home price index released Tuesday by Standard & Poor's. This is the first increase after six straight monthly declines. Prices have moved up 3.8% in the past year. Prices rose in 18 of the 20 metropolitan areas tracked by Case-Shiller in April compared with March. The data are not seasonally adjusted.

FOOTWEAR

Adidas planned ahead for increase costs in China

Sporting goods firm Adidas Group has enough diversity in its supply chain to withstand cost increases in China, the company's boss has told just-style.

Chief executive Herbert Hainer says Adidas has limited its reliance on China to less than 40% of products sourced, so it can withstand higher production costs and currency effects.

He told just-style in an interview: "We have brought some apparel production back into Europe and our suppliers are emerging into other countries like Vietnam and Cambodia. Therefore, we try to balance the risk of rising prices and salaries within the different countries. "If the prices are rising then we have to tackle it and become more efficient."

His comments follow news last week that China would allow its currency to move more freely against the dollar. This, together with rising wage demands and a weaker Euro, is expected to hike sourcing costs for European firms like Adidas.

He added: "You have a lot of different opportunities, you can raise prices but only if the consumers are able to buy it and only if you have innovative products. "On the other hand you have to work on the efficiency in your own company and on the efficiency of your supply partners."

Hainers comments were geared more towards garments than footwear but not doubt it is applicable for their leather goods as well.

Yue Yuen results

Yue Yuen, probably the world's largest manufacturer of athletic footwear, says it expects to see a boost in its footwear manufacturing activities on the back of the World Cup tournament currently taking place in South Africa. The company, which makes shoes for brands like Nike and Adidas, said turnover has already risen 17.6% year-on-year to US$1.01bn in April and May.

The outlook came as the firm posted a 3.2% drop in first-half profit to US$210.8m as higher tax expenses offset as increase in sales. Revenue in the six months to 31 March was up 4.3% to US$2.65bn, helped by orders from its brand name footwear customers who are increasingly consolidating their sourcing needs with fewer manufacturers.

Footwear manufacturing accounted for 69.3% of total sales, with soles and components contributing 8.5%. The total volume of shoes produced rose by 4.7% year-on-year to 136.1m pairs, and the number of production lines grew by 5.2% to 445 lines by the end of March.

Yue Yuen also saw 25.4% sales growth for its Greater China wholesale and retail operations - which include 2,272 directly, operated retail stores/counters. This unit generated revenues of US$590.0m and now accounts for about 22.2% of the group's total turnover.

Looking ahead, the company said it is optimistic in its outlook for the China retail operations, citing the strength of the PRC economy and rising consumer incomes. It also intends to offset rising input costs by tactically using its production facilities spread across China, Vietnam and Indonesia. (Just-Style.com)

Finish Line sales up

The Finish Line, Inc. reported sale climbed 9.0% in its first quarter ended May 29, to $282.4 million from $259.1 million a year ago. Comps climbed 10.9% compared to a 3.9% decline for the same period a year ago. Income from continuing operations significantly improved to $13.7 million, from $1.8 million a year ago.

Consolidated merchandise inventories decreased by 18.1% to $197.8 million at the end of the quarter compared to $241.6 million a year ago. Finish Line inventory declined 15.6% overall and 12.8% on a per-square-foot basis.

As of May 29, 2010, the company had no interest-bearing debt and $248 million in cash and cash equivalents, up from $119 million at the end of the first quarter a year ago.

"We are off to a strong start this fiscal year," said Finish Line Chief Executive Officer Glenn Lyon. "We posted a solid same-store sales increase and continued to make progress on effectively managing expenses as well as improving product margin and inventory efficiency. While customer traffic continues to be inconsistent, we will remain focused on our premium position in the marketplace and invest appropriately for continued growth."

Comparable store net sales on a month-to-date basis for the period of May 30 to June 22, increased 7.0% compared to a 12.5% decline for the same period one year ago.

Nike posts sales increased

For the full year, revenues declined 1% to $19.0 billion, compared to $19.2 billion last year. Excluding currency changes, net revenues were down 2% for the year. Fourth quarter net income increased 53% to $522 million and diluted earnings per share increased 51% to $1.06. Fiscal 2010 net income increased 28% to $1.9 billion and diluted earnings per share increased 27% to $3.86.

In fiscal 2009, NIKE, Inc. Incurred a $145 million after-tax restructuring charge in the fourth quarter, and third quarter results included a $241 million, after-tax non-cash charge related to the impairment of goodwill, intangible and other assets of the Company's Umbro subsidiary. Excluding these charges, fourth quarter net income and diluted earnings per share both increased 7%. For the full-year, comparable net income increased 2% and diluted earnings per share increased 1%.

"We finished strong with a great quarter and accelerating momentum across the business," said Mark Parker, President and Chief Executive Officer of NIKE, Inc. "During tough economic times our goal is to deliver solid financial performance and create competitive separation in the marketplace. We did that in 2010."

"Nike is at its best when we focus on our two core values: innovation and inspiration," Parker continued, 'Going forward you can expect to see more game-changing products, more compelling experiences wherever consumers touch our brands, and a laser focus on operational and financial excellence. These are the things that allow us to accelerate first and faster than everybody else."

Futures Orders

The Company reported worldwide futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from June through November 2010, totaling $8.8 billion, 7% higher than orders reported for the same period last year. Excluding currency changes, orders would have increased 10%. *

By geography and in total for the NIKE Brand, futures orders were as follows:

Geography	Reported Futures Orders	Excluding Currency Changes
North America	8%	7%
Western Europe	-2%	11%
Central and Eastern Europe	-2%	3%
Greater China	19%	16%
Japan	-17%	-16%
Emerging Markets	30%	30%
Total NIKE Brand	7%	10%

Geography Highlights

North America

During the fourth quarter, revenue for North America increased 4% to $1.8 billion. Footwear revenue was up 1% to $1.2 billion, apparel revenue increased 13% to $447 million and equipment revenue was essentially flat at $90 million. Earnings before interest and taxes (EBIT) for North America improved 8% to $435 million.

North America revenue for the full fiscal year was down 1% to $6.7 billion. Footwear revenue decreased 2% to $4.6 billion, apparel revenue was flat at $1.7 billion and equipment revenue increased 1% to $346 million. North America EBIT grew 8% to $1.5 billion for the fiscal year.

Western Europe

During the fourth quarter, revenue for Western Europe increased 2% to $956 million. Footwear revenue increased 1% to $593 million, apparel revenue was up 8% to $309 million and equipment declined 12% to $54 million. EBIT for Western Europe decreased 17% to $193 million.

For the full fiscal year, revenue for Western Europe was down 6% to $3.9 billion. Footwear revenue decreased 3% to $2.3 billion, apparel revenue declined 9% to $1.3 billion and equipment revenue dropped 15% to $247 million. Compared to last year, EBIT decreased 9% to $856 million.

Central and Eastern Europe

In the fourth quarter, revenue for Central and Eastern Europe was 9% better than the same period last year at $332 million. Footwear increased 9% to $199 million, apparel revenue grew 10% to $109 million and equipment improved 2% to $25 million. EBIT for Central and Eastern Europe decreased 9% to $84 million.

Revenue for Central and Eastern Europe declined 16% for the fiscal year to $1.1 billion. Footwear revenue decreased 12% to $660 million, apparel revenue dropped 21% to $399 million and equipment revenue declined 20% to $91 million. Compared to last year, EBIT decreased 32% to $281 million.

Greater China

Fourth quarter revenue for Greater China grew 12% to $464 million. Footwear revenue increased 14% to $246 million, apparel was up 10% to $193 million and equipment improved 17% to $25 million. EBIT for Greater China increased 20% to $187 million.

For fiscal 2010 Greater China revenue was essentially flat to the prior year at $1.7 billion. Footwear revenue grew 1% to $953 million, apparel revenue declined 2% to $684 million and equipment revenue improved 1% to $105 million. Fiscal 2010 EBIT for Greater China grew 11% to $637 million.

Japan

Japan's fourth quarter revenue declined 8% to $261 million. Compared to the prior year, footwear revenue was basically flat at $129 million, apparel revenue was down 13% at $105 million and equipment revenue dropped 17% to $27 million. EBIT declined 6% in the fourth quarter to $61 million.

Fiscal 2010 revenue for Japan declined 5% to $882 million. Compared to last year, footwear revenue increased 1% while apparel and equipment revenue declined 10% and 7% respectively. EBIT for Japan was down 12% for the year at $180 million.

Emerging Markets

In the Emerging Markets, revenue was up 47% to $556 million for the fourth quarter. Footwear revenue increased 42% to $355 million, apparel revenue rose 70% to $162 million and equipment revenue increased 19% to $39 million. EBIT for the Emerging Markets in the fourth quarter improved 46% to $114 million.

Full fiscal year revenue for the Emerging Markets was up 20% to $2.0 billion. Footwear revenue was up 23% to $1.4 billion, apparel revenue increased 22% to $532 million and equipment revenue declined 3% to $154 million. EBIT for the Emerging Markets improved 44% to $493 million for the year.

Other Businesses

Revenue in the fourth quarter for Other Businesses, which includes Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and Umbro Ltd., increased 9% to $714 million while EBIT improved 71% to $73 million.

For the full fiscal year Other Businesses revenue increased 5% to $2.5 billion. EBIT for the fiscal year was $299 million versus a loss of $193 million last year. Last year's results included a $401 million pre-tax non-cash impairment charge to reduce the carrying value of Umbro's goodwill, intangible and other assets. Excluding this charge, EBIT increased 43% compared to the same period last year. India's Euro zone debt crisis is posing harm to the domestic leather industry due to the currency fluctuation.

Rupee/Euro hurting Indian leather mfg

Industry sources said the appreciation of Rupee against Euro would bring down margins for small leather manufacturers making it difficult for them to survive.

Although the leather industry was just picking up pace, it was hit again due to the debt crisis in the Euro zone. The euro zone crisis impact would be huge as the EU is the largest importer of the products. EU accounts for nearly 62-65% of the overall leather exports from the country.

According to the provisional figures published by a leading industry organizations, overall leather exports registered a negative growth of 8.99% to $3,289.94 million from April 2009 to March 2010 compared to the corresponding period previous year. However, leather garments rose from $426.74 million to $429.85 million for the year ended March 31, 2010.

Finished leather exports witnessed a fall by 11.56% to $605.66 million during the period under review. Leather footwear declined by 6.20% to $11,63.12 million; footwear components plunged by 17.34% to $206.71 million and leather goods stood at $760.56 million, down 13.22%.

Chinese footwear mfg see gains in domestic rural mkts

As national policies intensify consumption in rural areas and competition is getting more intense in urban areas, an increasing number of Chinese footwear companies have been shifting their business focus onto the rural markets, according to the China Leather Industry Association.

While the Ministry of Commerce encourages foreign footwear companies to sell their products in the domestic market, industry experts point out that it is good way to expand the market into the countryside, stated the Association.

Products selling to overseas markets need to be superior in terms of quality, appearances and package, and much more competitive on prices than the same products sold domestically. A new focus on the domestic market can boost local footwear products to improve their quality, and thus enhance their competitiveness.

Turkish report says Chinese/Indian footwear imports up

According to a Turkey official media report on June 28, 2010, Adana, as an important economic province in Turkey, saw a sharp rising in footwear imports, whichmainly source from China and India.

Leather, textile and tobacco are the mainforeign trade sectors in Adana province, footwear exports had been greater than that of imports from 2004 to 2008, but dropped nearly three times in 2009, in contrast imports expanded significantly. India and China havereplaced Italyand become largest footwear suppliers for the province. India provided 47% of total footwear imports for Adana province, while China shared 17%.

UPHOLSTERY

Upholstery tanners saying business too quiet

In discussions with several upholstery tanners in China this pas week, they all noted that the market is still not moving, and they are waiting for some improvement in the sofa market.

Tanners/manufacturers say that while their raw material prices are easing, they prefer to wait to buy as they think/hope it willdrop down again.

US upholstery firms say floating Yuan no concern - yet

News of China's recent decision to ease its currency's peg to the U.S. dollar hasn't caused immediate concern from furniture industry executives that import finished goods from Chinese producers.

However, many industry leaders told Furniture/Today that they will continue to monitor the currency situation closely, since what happens with China's yuan will help them determine how to adjust pricing.

Should the currency strengthen against the dollar, it would make imports from China more expensive.

China's decision comes after a recent onslaught of cost increases that were already expected to send furniture prices higher this year, on expenses ranging from raw materials and container rates to rising labor costs in China.

A strengthening of the yuan would add to that pricing pressure.

"Obviously it would eventually cause us an increase in the price we pay for furniture, and there is that concern," said Phil Haney, president and CEO of case goods and upholstery resource Lexington Home Brands. He said his company already plans to implement a modest price increase in early August due to factors such as increased materials and finishing costs.

"There are definitely a lot of inflationary actions taking place at the same time right now," Haney said. Still, it's not clear how much the currency will change by year-end. Chinese officials have maintained that any change will be gradual and haven't said how much of a change they'll allow.

For that reason, Furniture today said that Haney and others aren't overly worried about a big spike in the cost of finished goods. "It's not giving us concern at this point," said Fred Henjes, president of case goods source Riverside Furniture, which imports nearly 100% of its product from China. "Right now we have a wait and see attitude."

"It's not like it will take off tomorrow," he added, referring to the yuan's value. "You might see a little effect in the upcoming months, but I don't think you will see a dramatic increase."

Jeff Young, CEO of case goods and upholstery resource Schnadig International, agreed that any increases in the value of the yuan will cause costs to rise. However, he noted that a stronger Chinese yuan would actually reduce the cost that Schnadig's Chinese parent company, Markor, pays for imported lumber and finishing materials. That factor could blunt the effect of a stronger yuan, he said.

Young added that the Chinese government's "obvious intention is to allow their currency to become more ‘flexible' over time, which means its purchasing power will vary amongst China's many trading partners depending on the strength or weakness of each country's currency. The bottom line is while we do anticipate some increase in the cost of our products going forward, we knew this was coming eventually and have been doing everything we can to offset and minimize the impact to our customers."

A strengthening of the yuan could benefit U.S. furniture exporters because that would make their goods less expensive to Chinese consumers. But here too, officials believe the effects will be minimal, especially if the change in value is between 2% and 5% over the course of 2010 as some economists predict.

"I don't think it's going to do a whole lot," said Mike Padjen, director of the North Carolina Furniture Export Office. He said a price decline of a few percentage points on popular goods in the upper-medium to higher-end price range won't affect the buying decisions of affluent Chinese consumers. "To me that's not enough to make any significant difference."

Keith Koenig, president of Fort Lauderdale, Fla.-based Top 100 store City Furniture, said he is comfortable with China's proposed currency shift.

"It is going to cause retail prices to go up, and I am not certain that is a bad thing," he said. "We have experienced so much price deflation over the years. While cars have probably tripled and everything else is up, the values we keep offering the American consumer are better and better. If prices go up for everybody, I don't know if that is the end of the world."

U.S. car sales lower in June

When it comes to car shopping, Americans are tapping the brakes. "The two big issues with consumers right now are employment growth and income growth, and they're not seeing much of either," said George Pipas, Ford Motor Co.'s top sales analyst.

Three firms that track auto sales predict automakers will report a sales decline of anywhere from 9.5 to 12 percent from May to June when they turn in their figures on Thursday. A double-digit decline would be the biggest monthly drop since January.

"People are just nervous about signing up for a three-year loan, so I think people who normally would've cycled out of a car a little sooner are deciding, 'Hey, I'll just drive this car for another year,'" said Tom Folliard, CEO of used-car dealership chain CarMax Inc.

Automakers sold 1.1 million vehicles in May, the best month so far this year. J.D. Power and Associates, Truecar.com and Edmunds.com are predicting that June sales will drop below 1 million.

At that number, sales would be well below a typical June over the past five years, which is 1.3 million, and far below the peak during that period of almost 1.7 million in 2005, according to Ward's AutoInfoBank.

If the weakness continues into summer, automakers will have to sell more to rental car companies and other fleet buyers. Otherwise, sales won't be too much better than last year's dismal 10.4 million, the lowest since 1982.

"With the recovery not progressing as expected, it's gut-check time for the automotive industry," said Jeff Schuster, executive director of global forecasting for J.D. Power.

J.D. Power expects a decline in sales to individuals. If that happens, automakers will be tempted to lower prices with big sales promotions — good for drivers but bad for the industry's bottom line.

One big change from a year ago could help automakers: They generally have kept inventories low after going through the trauma of restructuring in bankruptcy court. Recently, though, they have raised factory production.

GARMENTS & ACCESSORIES

Cavallai plans expansion

Italian fashion house Cavalli is planning to expand its accessories and menswear businesses in the next two to three years to help expansion in Asia and the US.

Company chief executive Gianluca Brozzetti said, "Our brand has traditionally focused more on womenswear and less on accessories. Our project in the next two to three years is to expand categories of products we have not developed well yet, like handbags and shoes."

He also said a stronger menswear business would yield good results for the company, whose Just Cavelli line is manufactured by Italy's Ittierre, a unit of fashion group IT Holding.

Brozzetti said the group's retail sales were growing double-digit, as in the first quarter of the year, helped by new store openings, including a fourth shop in Japan.

According to US consultancy Bain and Co., global luxury sales are expected to grow by more than 4% in 2010.

Tiffany does Wallets and other leather accessories

Luxury retailer Tiffany not only plans to open 16 new stores within the year, but also will launch a leather goods collection to expand their merchandise offerings.

The collection will be developed by designers Richard Lambertson and John Truex and will feature wallets, key holders, business card holders, and luggage tags to sell for US$100 or US$120. Tiffany’s CEO Jim Fernandez anticipates the leather goods collection will boost sales by 6-7%.

"We have to see how they sell on our major market stores, and then we can talk about further distribution around the world or through Europe," Fernandez said.

RAW MATERIAL

U.S.

Wet blue heavy native steers were offered at $82.00 c&f and wet blue heavy native cows at $$60.00, all without result

Wet blue whole hide branded splits 15/kg and up sold at $1.37 with additional quantities offered at $1.40 c&F

Australia

Despite a steep price decrease in early 2009, Australian hide prices are starting to recover as the global demand for leather has been picking up.

Wet blue hide prices were reportedly up 56% compared with May 2009 prices, while raw hide prices have risen by more than 400%, having been particularly badly impacted last year.

Figures show that cattle hide prices rose 19% to $60.8 million between January and March compared with the same period in 2009, although this is still relatively low compared with prices prior to the global economic downturn.

Hide exports fell 53% in volume during the first three months of the year to 1.9 million pieces. Adult cattle slaughter fell 6% to 1.8 million head.

Brazil

Wet blue, whole hides, machine flayed, full substance, average 48/52 ft, average 23 kg

Selection TR1 at around $ 1.25-1.30/ft CFR.

Selection TR2 at around $ 1.15/ft CFR.

In sides, we can say that prices are about these:

	substance 2.4/+ mm

selection B	$ 1.40
selection C	$ 1.20
selection D	$ 1.00
selection E	$ 0.90

The crust leather for upholstery, in substance 0.9/1.1 mm, in sizes varying from 48 to 56 ft:

$ 1.25-1.28/ft CFR for selection TR1

$ 1.15-1.18/ft CFR for selection TR2

The automotive upholstery leather, in substances 1.1/1.3 to 1.2/1.4 mm, stucco and buffed, at:

$ 1.35-1.40/ft CFR for selection TR1 (Asking price)

$ 1.25-1.30/ft CFR for selection TR2 (Asking price)

Argentina

The crust leather for automotive upholstery, in substance 1.1/1.3 to 1.2/1.4 mm, has been sold at levels like:

$ 1.35-1.45/ft CFR for material that can either be stucco and buffed for the most requiring customers, but usually sold for full grain type of leather.

And at $ 1.25-1.30/ft CFR for a medium grade, stucco and buffed.

For upholstery crust leather, we can find prices from $ 1.15 up to 1.50/ft CFR, depending on selection, grain, region, substance, etc.

For shoes, in substance 1.2/1.4 mm, natural/not dyed, prices have been:

TR1 - $ 2.20/ft CFR

TR2 - $ 1.80

TR3 - $ 1.40-1.50

LOOKING AHEAD

The squeeze between US hide prices and what tanners can sell leather for in the Far East continues. Can shoe manufacturers induce brands to increase their prices, or the brands contract shoe factories to pay more for leather to their tanneries who supply them? This may not be known for at least another 30 days.

Meanwhile, for US material, substitution remains the order of the day. Tanners who used to rely on American hides now source in Australia/New Zealand, Europe, and most importantly Brazil.

Is the hide or wet blue or crust leather the same? No, but with the chemical and machinery available, they have a chance to meet their customers specifications.

However, this is not universal and since many US brands insist on US raw material, tanners are still squeezed almost to the breaking point.

Leather Table

Shoe Upper Leather	This Week	Last Week
Full Grain aniline, cowhide 2.0 mm and down	2.45-2.50	2.45-2.50
Full Grain aniline, cowhide 2.0/2.4 mm	2.45-2.50	2.45-2.50
Full Grain aniline, cowhide 2.4 mm and up	2.45-2.50	2.45-2.50
Corrected leather, cowhide 2.0 mm and down	1.70-1.80	1.70-1.80
Corrected leather, cowhide 2.0/2.4 mm	1.70-1.80	1.70-1.80
Corrected leather, cowhide 2.4 mm and up	1.70-1.80	1.70-1.80
Upholstery Leather	This Week	Last Week
Full Grain aniline, cowhide 1.0/1.4 mm	2.80	2.80
Full Grain aniline, cowhide 1.4 mm and up	3.20	3.20
Corrected leather, cowhide 1.0/1.4 mm	2.60	2.60
Corrected leather, cowhide 1.4 mm and up	3.01	3.01
Split Leather	This Week	Last Week
Embossed, smooth 1.4/1.6 mm	.90-.95	.90-.95
Embossed haircell 1.4/1.6 mm	.90-.95	.90-.95

European Weekly Market Report Archive - 7/2/2010

Craig Roalson, Editor

Reflections on The Week

Siege Mentality In European Cattle Hide Market

Activity continued to be restrained across much of Europe on cattle hides this week, mostly for the same reasons as have been nagging the trade for several months. The only real shift of late has been the coming of summer and its impact on impending European tannery shutdowns. This has gradually modified buying and selling strategies in subtle but significant ways.

A firm tone persisted in most hide categories as the shortage of raw materials once again became a key topic of discussion. And for good reason. With the normal summer closure of tanneries in southern Europe now only three weeks away, negotiations were underway to contract packer hides with delivery times spanning into September. The prices were mainly steady but the affect on the rest of the market was generally firmer.

In fact a major producer in France was said to have sold some categories even into October this week. Other local suppliers were solicited with inquiries but mostly held out in order to digest what was going on. The need for hides was also evident in other western and northern European countries, most of which had relatively lively interest for the few hides available. Abattoir prices, at least for the week, did not appear to budge and slaughter levels across most of Europe remained below normal. With hide weights reaching their lightest averages of the year, equations for dealers became even more complicated than usual.

Another factor contributing to global market firmness was the very large U.S. cattle hide export sales total from one week ago which was released yesterday. 691,900 raw hides plus 181,900 wet blues meant a grand total of 873,800 U.S.A. cattle hides were reported sold abroad for the period. While the actual sales numbers seem inflated to some, others explain that traveling packers and traders during the last several weeks put off reporting their sales until they returned home last week. Whatever the case, the impressive number supports the firm trend seen in the North America as well as in Europe and elsewhere around the globe.

The fact that over 50% of the hides listed in the above report are destined for China underscores just how much China continues to drive the market. The seemingly unquenchable appetite displayed by the Chinese has also served to augment the shortage of available hides needed to fuel whatever business is going on in Europe. European hide exporters reported decent interest from China this week, too. Although some exporters had already booked enough containerized sales beforehand to bridge the local European holiday closures, others took advantage of the spill over interest this week, mostly at more money than previous sales, and extended their sales postures accordingly.

It now appears that the tone and price of better quality European hides will remain tight in the weeks to come. Under-bought tanners are going to have to face unfavorable levels on most selections well into summer. Only certain female categories and lower quality selections are seen as vulnerable to the lull typically experienced in July and August.

Upcoming European Trade Show Events

Leather and Shoes	Kiev, Ukraine	July 20-23
Pure London	London, UK	Aug. 1-3
Moda Footwear	Birmingham, UK	Aug. 8-10
Leather and Fur	Kiev, Ukraine	Sep. 14-17
Le Cuir	Paris, France	Sep. 14-16
MIPEL-MICAM	Milan, Italy	Sep. 19-22
Modacalzado-Iber.	Madrid, Spain	Sep 24-26
Lineapelle	Bologna, Italy	Oct. 12-14
Tanning Tech	Bologna, Italy	Oct. 12-14
SIMAC	Bologna, Italy	Oct. 12-14

This Week's Currency Corner: U.S. Dollar, Euro And Pound

	USD-EUR	EUR-GBP	USD-GBP
Friday, June 25	1.231	1.215	1.495
Monday, June 28	1.233	1.222	1.506
Tuesday, June 29	1.219	1.235	1.506
Wednesday, June 30	1.228	1.221	1.499
Thursday, July 1	1.233	1.215	1.498

Industry News Bullets

UK- Leather And Footwear Among Culprits In Sales Drop

In the latest high street report for June, sales have fallen slightly overall. “Footwear and leather goods were the worst hit,” said CBI adviser Ian McCafferty.

Netherlands- Troostwijk Hosting Leather Machinery Auction

Amsterdam-based auction company, Troostwijk, is running an online auction for tannery finishing machinery formerly used at Finilux BV of Waalwijk. The auction ends September 8. Visit: www.troostwijkauctions.com for details.

Belgium- Indian Leather Business Hurt By Euro-Crisis

Indians are bracing for a serious negative impact based on the current Euro crisis. A stronger rupee makes indian products less competitive while EU austerity measures will likely curtail consumer spending. EU consumers currently buy 62-65% of all Indian leather exports.

Germany- Demand Favoring Luxury Cars

According to a news report, rising demand for luxury cars has prompted Mercedes-Benz, Audi and BMW to hire temporary workers and additional shifts. All three of these companies reported double digit gains in May.

Italy- Huge U.S. Weekly Exports Dominated By China

China accounted for 57% of last week’s 691,900 U.S. raw cattle hides sales. The only European participation was from Germany with 1,700 pieces and Italy with 400. Italy did manage a respectable 20,700 wet blue hide purchases out of the 181,900 piece overall total.

Germany- Adidas Signs With Pou Sheng In China

Adidas signed an agreement with Pou Sheng International to help in its efforts to localize design, production and sales of its high-end Reebok sports brand.

Raw Hide Markets Across Europe

UK, Irish Ox/Heifers Fully Steady-To-Firm

More follow up business mainly between the Chinese and the English shored up the market for UK and, to some extent, Irish ox/heifer hides this week. Although the interest was not particularly robust, it was solid and not limited to Asian clientele only. By the end of the week it appeared as though at least as many hides were sold as produced.

Butchers felt a bit more of the ‘trickle up’ and were able to hold pat with stand on prices for yet another week. This was more easily achieved this week than last with the additional interest filtering in. Slaughter levels were also less than satisfactory, which also helped abattoirs resist any down bids.

As has been the case more often than not during the last year or so, China provided the key support this week, paying nearly $80.00 CNF on the top end for UK 36 and ups. We received reports that both $79.00 and $79.50 were done in multi-container deals. Irish 36’s saw moderate action at $75.00 CNF main Chinese port. Others held for $76.00.

Other business uncovered this week saw UK 31’s selling also to China at $75.00 CNF.

The ground work for the above prices was laid by increases seen most recently in North America on various fleshed Texas and branded steer selections. Sales this week concluded to Chinese tanners eclipsed $80.00 with a top on normal seasonal averages of $81.00 CNF. This was significant because tanners there had vowed not to pay more than $80.00 a month or more ago when they targeted their next price point of $75.00, a level that never came to pass.

Back in Europe, sales were more difficult and the market a bit thin. However, we heard that producers were able to sell lighter weight averages locally for decent money. UK 26’s were dealt in one instance at GBP 1.35 per kilo ex yard. Irish 31’s brought 1.25 delivered Italy in another sale, which was fully steady on the top end of our price guide.

Forecast: The drama with the above sales is that they are still not deemed profitable for the processors, though close when calculating the related abattoir cost. However, just as tanners are having to choose between operating at a slight loss or not operating at all, the processors are faced with a similar plight. Given that abattoirs are not going to let up on their levels for at least the next couple of weeks or so, at least processors are now in a position to press for more money at the tannery level. Are they going to get it? We anticipate that minor advances could be forthcoming, at least in Sino trade.

European Cow Market Stuck In Narrow Range

Female Hides Report

Click on chart to view underlying data.

Trading was generally mixed this week in what was deemed a very complicated and confusing scene. We understand that some of the larger cow tanners in Italy concluded programs with abattoirs on heavier cow averages covering the month of September. While we were not privy to the exact prices paid, we were told that the level was essentially ‘steady’ for the wholesale market. This could mean approximately EUR 1.35 on good volume for French 32+, as well as for North German or Dutch 25 and ups.

This left other sellers to contemplate how to manage their own sales. Several with whom we spoke today mainly refrained from participating. However we noted that everyone had at least some tannery inquiries to consider. The interest appeared to be balanced between European and Chinese customers. Asian appetite was less elastic than what few pockets of business sellers were able to put together within Europe.

While Chinese bids came in for medium weight averages at $56.00 to $58.00, there were more interesting truckload deals to be had within Europe itself. For example, we heard that a choice French production of 32 and ups sold for as high as EUR 1.55 delivered North Italy. The same producer claimed he sold his lights for EUR 1.65 NIT. A competitor says the market is 10 cents less.

We also heard that a small quantity of South German 30-39 kilo cows sold to EUR 1.50 delivered tannery.

The Brazilian wet blue TR 1 market continued unmoved during the last five trading days. Offerings seen at mainly USD $1.30 were bid at between $1.20 and $1.25 and were mainly rejected.

There was also interest in North American plump cows, both branded and native for delivery after the holidays. Italian bids on fleshed native cows weighing 48/52 lbs. placed in the low $50.00 area CIF were countered at several dollars higher. Similarly, bids were seen on 50/52 lb. fleshed U.S. branded cows at $46.00 and also countered accordingly. It was not known if any of this business was ultimately written.

Forecast: Despite the activity noted above, popular opinion is that cows, in general, are still vulnerable to eventual declines. Although cow tanners are reported to be low on stocks, their business is also suffering. Facing lousy or no profit margins, most are expected to continue to buy only hand-to-mouth in hopes of creating some form of downward price momentum. We feel, too, that some concessions may be made on the part of sellers, something we feel is quietly happening even now, but that the process may be slow and begrudging.

Veal Skin Lacks Motivation

The veal skin market was extremely quiet this week. Sellers had postured themselves quite well heading into the weekly trading period and generally did not need to offer. As such they simply allowed any demand to come to the surface on its own.

As it turned out there were not many bids to respond to, especially of the caliber that would motivate sellers to book additional quantities beyond their already elevated price points. It was also interesting to note this week that equivalent weight average North American Provimi kip skins were also dormant for a second week in a row. There was no activity reported this week and no export sales reported for last week.

Given the dearth of activity in this niche category this week, we are maintaining our price guide levels from those of last week.

Forecast: We sense that prices have reached a plateau on a relatively high plain for the moment. Tanners do not find it in their best interest to press the level upward by bidding against themselves without legitimate offers placed in front of them. Producers, for their part, are busy processing orders and salting material which they feel they can easily sell if they wanted to. The conclusion is that a stalemate is in progress.

Bull Hides Press On

Male Hides Report

Click on chart to view underlying data.

Prices continued to bump the ceiling of what tanners feel compelled to pay even if in a number of situations these levels are already unprofitable. However, producers were undaunted by any resistance.

Monthly auctions were inconclusive in some countries but certain abattoirs made their deals with automotive tanners which locked in firm levels for the producers but also ensured much needed and desirable source product for car upholstery. In one such case a substantial abattoir is said to have committed his male hide production through September.

Again, other negotiations did not appear to be set in writing as of today but we did hear a few prices where industry players said business either was concluded or could be done. South German 40 and 50 and ups were pegged at EUR 2.05 with initial producer indications as much as 5-10 cents more. North German 40-49 kilo bull hides could be sold for EUR 1.70 according to one report and EUR 1.75 as pegged by another. A French dealer said he sold his heavy bulls at EUR 1.75, also delivered.

Although the better European bull hide selections have been totally out of reach of the Chinese market for months, there is still a subtle support on male hides in general based on persistently good auto upholstery and shoe business in China. This has shored up demand for lesser steer-type selections and European ox/heifer hides at more affordable prices. Europeans also continue to contribute to the firming trend seen in U.S.A. fleshed heavy native steer hides which are now asking between $84.00 and $85.00 delivered European tannery. Bids of $82.00 were rejected this week.

Forecast: The relentless firmness in bull hides has been the backbone of the entire bovine complex ever since they hit rock bottom 14 months ago. Where as further increases from this point on will be hard to forge without serious finished leather concessions by car makers, we fail to see any let up in the related raw hide market.

Looking Ahead (Commentary)

Fishing For Customers

I have never been a great fisherman, although in my younger years I used to enjoy outsmarting a pike or a trout. There were different approaches, techniques and equipment one used for various types of fish in their diverse habitats. Although I could catch an array of different types of fish using a simple hook and worm, my chances of success were greatly enhanced if I seriously studied the habits of one specific quarry and applied that knowledge accordingly.

That “quarry”, that specific variety one might wish to capture is analogous to what we in hide and leather business would call our “target market.” A trout fishing specialist might be the equivalent to a certain niche leather salesman who is aiming only at a narrow spectrum of the entire leather world. He might be the top end veal skin leather guy who is only ‘fishing’ in small, isolated streams for an elusive, but very prized customer.

Fishing professionals will offer hundreds of ideas how to catch a trout, for example, but they are all connected to one basic principle: you have to think like a trout. This is the key to sales of any kind. What is the nature of your customer? What type of environment does he thrive in? When does he tend to “feed” or want to have his buying appetite satisfied?

We are living in a very sensitive consumer environment today. Are you aware of what times your customer is most likely in his office and not in a sales meeting? If you don’t know his pattern, ask him. Tanners also don’t want to buy hides if they are in the middle of sorting leather for their own customers. Most customers don’t want to be bothered when they are eating lunch or preoccupied with routine management duties. The notion here is to know your customer’s environment and be sensitive to it.

Knowing the personal “hot buttons” a customer may have is also crucial to successful angling in the hide or leather business. In other words, these are specific manias or focus areas a customer may obsess over. One tanner might fuss over having very uniform hide weights and really scrutinize how tight the weight range of his product is coming into his plant, but he might not be so keen on grain quality. The next guy might be just the opposite, fighting tooth and nail for the best grain he can obtain, but quite willing and able to accept a wide range of weights in his hide deliveries.

I had a customer who hated salt in his shipments and he complained bitterly if there was too much salt included on his pallets and among his hides. After fighting what I felt were a few frivolous salt claims, I finally told the source plant to stop putting salt on the hides (which they were doing in order to ensure no hair slip) and the customer has been fine ever since. The hides were exactly the same in both cases.

In today’s extremely stressful market with margins so pinched for everyone, even the slightest difference might just make the difference in customer loyalty and happiness. Knowing and tending to the specific nature of your customer might just be what keeps him coming back to you instead of your competitor. Everyone is saying that there are too many players in the current environment and that attrition is going to put the most expendable operators out of business. Now is the time to take a fresh look at each of your individual accounts. Tending to each customer’s specific desires may not even cost you more money, but it takes a thoughtful and insightful approach.

So think more like your customer. And happy fishing!

Craig Roalson (editor)

Hidenet.com

A Reminder to our Readers

All the price charts we print are intended to be used solely for a basis of helping illustrate trends in the market. The actual prices seen in them do not reflect qualitative variation from one origin to another. Hidenet.com recognizes that there is a variety of factors which determines different prices for similarly described merchandise.

Latin American Report Archive - 7/2/2010

Juan Henrique Izquierdo, Editor

THE WEEK IN REVIEW

With few exceptions, mostly related to the brands and main projects, most tanners are in doubt on what to buy.

Some usual customers are not giving their order yet as they even don’t what’s going to happen, or what are they going to sell after holidays in the north Hemisphere.

Many tanneries/customers abroad are realizing now that the wishful thinking of a market going so much down is not going to happen.

There are simply no stocks of anything worldwide. The volumes that have been traded during 2010 were not enough to fulfill both, stocks and consumption. Almost everything was used and consumed. Maybe some few items that were not demanded are in stock, but mostly speaking everything is gone.

We couldn’t agree more with what we read that some tanners committed the automotive industry, entered into a fight too early at the beginning of the year. And this made them accept finished leather prices that couldn’t be afforded unless they lower too much the selection without altering the specifications, or take a big loss.

Optimists say they are taking a loss. Well, not that much.

Mostly they are simply lowering the selection and not a bit, but a lot.

This has a strong influence in the Brazilian and Argentinean leather production and it would be at least weird if we say we don’t know what’s being shipped to abroad, and therefore what is that tanners that produce automotive upholstery are using for finishing.

And it’s definitively not the case in which the supplier of crust from Brazil or Argentina, are shipping an inferior selection than contracted. They are shipping the exact selection that was contracted and the buyer is in an absolute accordance to this. The name of this selection is called “price”. Every year, being it in a major or minor scale, but it’s the same old story.

The Brazilian Center of the Tanning Industry (CICB), thru it’s President Mr Wolfgang Goerlich, is criticizing the lack of control on the law that should be applied in the country, regarding the fact that is forbidden to mention the word leather if the merchandise is not real leather.

We are talking about those expressions such as “artificial leather”, or like it’s commonly used in Asia “man made leather”.

I mentioned this in the report many times, in one a way or another, and even raising the discussion about suppliers that produce this kind of material for not being along in the same leather fair. In the best case they should be altogether in another and separate room.

But why bring this up again? It’s been proven futile

Most of the consumers worldwide (that’s right, worldwide), and when I say most I mean really most, do not know how to distinguish leather from these artificial materials theat are around us, mostly now a days when the leather is each time lower and much covered. Only the use of the product itself will teach them it’s not leather, and then its too late. Maybe it would be good if this law would be somehow applied worldwide.

Still speaking about Brazil, In June the country exported $165 million, in some form of leather which was about 73.68% more than June 2009, and also 5.77% more than in May this year. During the first semester Brazil exported $873 million, against $492 on same period during 2009.

It was released that American slaughters were of about 667,000 heads last week, and this is considering it’s been a good season with big kills.

If we multiply this by the number of weeks of the year, we will come to a figure of about 35.3 million. This is about 8-10% less than Brazilian slaughter of last year, which was considered to be the lowest in a long time (with herd reduction and all that…).

Right now the figures seem to be improved although we cannot trust official releases about this since they come very incomplete and without considering what is not officially slaughtered…

RAW HIDES

In Brazil the situation seems to be weird. Seemingly there are not enough hides for everybody, the dollar rate sometimes helps during some days and sometimes it doesn’t during most of the time. In local currency raw hides had another rise differently from region to region.

We maintain the same price in dollars in our chart since this has been either influenced by a much lower dollar rate some 3-5 months ago and now, with a better dollar rate but a much higher value in R$ due to the increase with rise after rise.

WET BLUE & CRUST

We cannot say there isn’t any movement in prices. There is.

Buyers are trying to move downwards and sellers are forced to move upwards. This is what we can call a stop.

The market will stop if the buyer side doesn’t recognize that their prices are unreal in what concerns the cost of doing the leather. The seller side works only with costs that affect the price of the wet blue hides and crust leather they sell. The buyer side works always with the edge in which the final consumer is involved. And what happens is that his negotiation is with their final customer that all the time asks for a lower price not because the final consumer asks for it. But because they want to win the price war against their competitors.

Well gentlemen, this customer is wrong. They are transferring all what they want to do in the market to the whole chain that produced the product he is buying. If this is done indefinitely something bad is going to happen. You don’t take juice from an orange twice. But you can have a double crop of oranges if you are wise and know how to invest… It’s just a matter of handling it properly.

PRICES

Prices in Brazil (Most of the prices below are the current prices that we know to be the ones being really used and at which there are business in the market, unless they are market “asking price”).

Click on chart to view underlying data.

Wet blue, whole hides, machine flayed, full substance, average 48/52 ft, average 23 kg

Selection TR1 at around $ 1.25-1.30/ft CFR.

Selection TR2 at around $ 1.15/ft CFR.

In sides, we can say that prices are about these:

	substance 2.4/+ mm

selection B	$ 1.40
selection C	$ 1.20
selection D	$ 1.00
selection E	$ 0.90

The crust leather for upholstery, in substance 0.9/1.1 mm, in sizes varying from 48 to 56 ft:

$ 1.25-1.28/ft CFR for selection TR1

$ 1.15-1.18/ft CFR for selection TR2

The automotive upholstery leather, in substances 1.1/1.3 to 1.2/1.4 mm, stucco and buffed, at:

$ 1.35-1.40/ft CFR for selection TR1 (Asking price)

$ 1.25-1.30/ft CFR for selection TR2 (Asking price)

Prices in Argentina

Click on chart to view underlying data.

The crust leather for automotive upholstery, in substance 1.1/1.3 to 1.2/1.4 mm, has been sold at levels like:

$ 1.35-1.45/ft CFR for material that can either be stucco and buffed for the most requiring customers, but usually sold for full grain type of leather.

And at $ 1.25-1.30/ft CFR for a medium grade, stucco and buffed.

For upholstery crust leather, we can find prices from $ 1.15 up to 1.50/ft CFR, depending on selection, grain, region, substance, etc.

For shoes, in substance 1.2/1.4 mm, natural/not dyed, prices have been:

TR1 - $ 2.20/ft CFR

TR2 - $ 1.80

TR3 - $ 1.40-1.50

Everything below is considering the usual brine cured, no bulls. Range weight for salted is 14-19 kg and for fresh hides is -/24 kg.

Please note these are the average prices, so it might happen someone is paying more (for the higher end) or less (for the lower end) depending on the region.

Buenos Aires / Mendoza

Steers	$ 1.35
Cows	$ 1.00
Heifers	$ 1.24

Archivo Americano Latino Del Informe - 7/2/2010

Juan Henrique Izquierdo, Redactor

LA SEMANA EN REVISTA

Con pocas excepciones, su mayoria relacionada a marcas y proyectos principales, la mayoria de los curtidores no saben aun que comprar.

Algunos cientes usuales aun no dejaron sus ordenes ya que ni saben aun que sera lo que viene despues de las vacaciones en el Hemisferio norte.

Muchas(os) curtiembres/clientes del exterior ahora se dieron cuenta que el pensamiento deseoso de que el mercado cayera tanto no vendra de hecho.

Simplemente no hay stocks en ninguna parte en todo el mundo. Los volumenes comercializados hasta ahora en el 2010 no fueron suficientes para el suministro de ambos, stocks y utilizacion diaria.

Casi todo fue ya utilizado para uso y consumo. Talvez algunos pocos articulos que no fueron demandados sigan en stock, pero la mayoria ya se fue.

No podriamos estar mas de acuerdo cuando pudimos leer en otros medios, de que algunas curtiembres se han compromisado demasiado temprano con la industria automotiva al inicio de este ano. Y esto hizo con que aceptaran un precio muy bajo para su cuero terminado, que hace rato ya no puede ser alcanzado, a no ser que se baje demasiado la seleccion sin alterar las especificaciones, o tomar una gran perdida.

Los optimistas dicen que estarian tomando perdida. Bueno, no tanto.

La mayoria esta simplemente utilizando seleccion mas baja, y no un poco, mucho mas baja.

Esto es algo que tiene gran influencia en la industria del cuero de Brasil y Argentina, y seria raro que nosotros no supieramos que es lo que se esta embarcando al extranjero, y con eso que es lo que las curtiembres usan para hacer su terminado.

Y definitivamente no es el caso en el cual el proveedor, sea de Brasil o Argentina, este embarcando fuera de lo contratado. Ellos embarcan exactamente lo contratado y el cliente esta de pleno acuerdo. El nombre de esa seleccion hoy es “precio”. Todos los anos pasa exactamente lo mismo, sea en mayor o menor escala, pero la historia es la misma.

El CICB en Brasil, atraves de su Presidente Sr Wolfgang Goerlich, critica la falta de control de la aplicacion de la ley en el pais, que no permite el uso de la palabra “cuero” para nada que no sea cuero de verdad. O sea esta prohibido decir que algo sea “cuero artificial”, o de como se costumbra utilizar en Asia, “cuero hecho por el hombre”.

Ya mencione aqui varias veces, incluso levantando la discusion sobre que los proveedores de materials sinteticos que imitan cuero siquier estuvieran en la misma feria de cueros. En el mejor de los casos deberian estar en otro recinto totalmente separados de lo que fuera cuero.

La mayoria de las personas alrededor del mundo (eso mismo, alrededor del mundo), y cuando digo la mayoria es realmente la mayoria, no saben distinguir el verdadero cuero de una imitacion en los productos que existen alrededor nuestro, principalmente ahora que cada vez mas se hace mas cuero de baja muy cubierto etc.

Unicamente el uso del producto les va a ensenar que no era cuero, y ahi ya es tarde.

Talvez fuera bueno que esa ley fuera aplicada de alguna forma a todo el mundo.

Aun hablando de Brasil, en Junio el pais exporto $ 165 millones, aproximadamente unos 73,68% mas que Junio del 2009, y tambien un 5,77% mas que Mayo de este ano.

En el primer semestre Brasil exporto un total de $ 873 millones, contra los $ 492 millones del mismo periodo el ano anterior.

Fue publicado que los numeros americanos de faena revelaron cerca de 667.000 cabezas la semana pasada, y eso considerando que la matanza en los EEUU estaria Buena/alta. Si multiplicamos ese numero por el numero de semans del ano llegamos a 35,3 millones de cabezas. Eso es un 8-10% abajo del total de la faena de Brasil del ano pasado, la cual fue considerada mala (hasta con una reduccion del tamano del rebano nacional y todo eso…).

En este momento los numeros parecen estar mejorando si bien no se pueda confiar en datos oficiales, ya que vienen bastante incompletes y ademas desconsidera la faena “no official”…

FRESCOS Y SALADOS

En Brasil la situacion parece rara. Aparentemente no hay cueros suficientes para todos, el dolar a veces ayuda durante algunos dias y la mayor parte del tiempo estorba. En moneda local, los cueros tuvieron ahora otra subida, cn valores diferentes de region para region.

Mantenemos el mismo precio en nuestro cuadro abajo ya que estuvo influenciado por el dolar en los ultimos 3-5 meses, y ahora, con un dolar mas alto pero con un valor mas alto en R$ despues de subida en subida.

WET BLUE Y SEMI TERMINADO

No podemos decir que no hubo movimiento en los precios. Hay.

Los compradores intentan mover sus precios para abajo y los vendedores son forzados a querer subirlos. Esto es lo que podemos llamar de una parada. El mercado se va a parar si los compradores no reconocen que sus precio son irreales para lo que cuesta un cuero.

El lado vendedor trabaja con lo que le cuesta hacer el cuero que venden. Ya el lado comprador trabaja con el precio final. Y en general este es el lado que esta directamente conectado al consumidor final.

Lo que sucede es que su cliente pide cada vez precios mas bajos, no solo porque los consumidores finales le piden que asi sea, pero porque quieren ganar la Guerra de precios contra su competencia.

Bueno senores, esto esta mal. Estan transfiriendo todo lo que quieren conseguir hacer en su mercado a toda la cadena que viene antes de ellos, que produce lo que ellos compran. Si esto es hecho indefinidamente el resultado no sera bueno a lo largo del camino.

No se saca el jugo de una naranja dos veces, pero si se puede duplicar la produccion de naranjas si uno sabe como invertir…es apenas un problema de manjar mejor el tema.

PRECIOS

Precios actualizados en Brasil (Estos son los precios a niveles los cuales sabemos y tenemos conocimiento de negocios realmente realizados, a no ser cuando indicamos “precio pedido”).

Click on chart to view underlying data.

Para cueros enteros wet blue, pleno espesor, promedio de 48/52 p2, promedio 24 kg

Seleccion TR1 a $ 1,25-1.30/p2 CFR.

Seleccion TR2 a $ 1,15/p2 CFR

En lados, los precios son:

	espesor 2.4/+ mm

seleccion B	$ 1.40
seleccion C	$ 1.20
seleccion D	$ 1.00
seleccion E	$ 0.90

El semi terminado para tapiceria, espesor 0.9/1.1 mm, tamano de 48 a 56 p2, a:

$ 1,25-1,28/p2 CFR para seleccion TR1

$ 1,15-1,18/p2 CFR para seleccion TR2

El cuero para tapiceria automotriz, en espesores de 1.1/1.3 a 1.2/1.4 mm, estucado y deflorado, a:

$ 1,35-1,40/p2 CFR para un TR1 (Precio pedido)

$ 1,25-1,30/p2 CFR para un TR2 (Precio pedido)

Precios actualizados en Argentina

Click on chart to view underlying data.

El cuero automotriz semi terminado, en espesores de 1.1/1.3 a 1.2/1.4 mm, se venden a niveles como:

$ 1,35-1,45/p2 CFR para material que tanto podra ser estucado y deflorado o flor entera.

Y a $ 1,25-1,30/p2 CFR para una seleccion intermedia, estucada y deflorada.

Para tapiceria semi terminada, podremos encontrar precios de $ 1,15 a $ 1,50, dependiendo de seleccion, flor, region, espesor, etc.

Para calzado, en espesor 1.2/1.4 mm, natural/sin tenir, los precios son:

TR1 - $ 2.20/ft CFR

TR2 - $ 1.80

TR3 - $ 1.40-1.50

Todo abajo es considerando salmorados, sin toros. Extremos de peso para salado 14-19 kg y frescos menor que 24 kg.

Favor notar que estos son precios promedios. Puede ser que se esta pagando mas (por cueros de regiones mejores) o menos (por lo opuesto).

Buenos Aires / Mendoza

Novillos	$ 1.35
Vacas	$ 1.00
Vaquillonas	$ 1.24