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The Week at a Glance:
- Prices lower
- Pollution issues continue to plague Chinese tanneries
- Trickle down effect of Payless bankruptcy
- Combined wet salted/wet blue export sales 442,300
- Combined wet salted/wet blue shipments 609,400
- Combined wet salted/wet blue outstanding 3,208,300
- Slaughter exceeds sales/shipments ahead
- Forecast: More of the same
- Market Observations: How long will the buyers market continue?
Heavy Texas Steers mixed
Texas steer prices attracted the most attention, after dropping precipitously at the APLF in Hong Kong last week. As the trade dispersed on Friday, the price range on 62/64 lbs. was $68.00 and $69.00 lbs or $75.00 or less c&f.
This week, one packer managed to achieve a sale at $70.00 but this was the exception rather than the rule The bulk of sales, like in Hong Kong, were between $68.00 and $69.00. 74 lb. minimum averages sold at $71.00, also steady to Hong Kong. One reported trade at 70 lbs. and up at $75.00 was not deemed to be market indicative according to some members in the trade. Over-all volume appeared to be moderate.
Branded Steers lower
Most of the business in this category was in Colorados. However, one selection that contained some natives traded at $71.00 after rejecting bids at $68.00 up to $70.00 on seasonal weights. Trading posted on Colorados typically sold at $64.00 and $64.50 on averages between 62 and 66 lbs.
Butt Branded Steers down $1.00-$2.00
Buyer interest on butts was decent but only at lower prices. The highest level posted was at $73.50 on seasonal weights early in the period. Most trades were consummated by mid week at $73.00 on 62/66 lb. averages. A reported trade at $72.00 could not be confirmed. A sale on 68/70 lbs. was heard at $80.00
Heavy Native Steers down $2.00
Native steer sellers were forced to succumb to lower bids as the week wore on. Early in the period sales were made at $77.00 generally on 62/66 lb.wight, but by today, some bookings were seen down to$75.00 on the same or similar averages. 68/70 lbs. were posted at $83.50, up from last weeks nominal quote.
Heifers $1.00-$2.00 lower
Heifer trading appeared to have picked up a bit this week. Heavy native heifers sold at $57.00 on 50 lbs. and up and brands were posted at $54.50.
Plump Cows down $1.00
The cow sector was not immune to declines in steers and heifers. We did not have any confirmed sales of heavy native cows but brands sold down to $38.00 and $39.00 on seasonal weights.
Holsteins nominally lower
The same slow down in furniture upholstery demand in China, and elsewhere has affected tanner interest for dairy cows at previous levels. Dairy cows were essentially unquoted by producers but rumors were heard of sales down several dollars from Hong Kong levels. As usual premium productions were dollars higher.
BULLS
Natives with a small brand percentage sold at $55.00 Laredo on seasonal weights. 100/110 lb. Midwestern brands were available at $50.00 Laredo.
SMALL PACKERS
60/62 lb. natives sold at $44.00. There seemed to be more supply available than tanners interested in buying at current levels.
INDUSTRY NEWS
Pollution issues continue to plague Chinese tanneries
Chinese tanners and their municipalities are on guard for the countries EPA equivalents which could come at anytime without warning. If not complaint, they are apt to be immediately closed. This is one reason a number of tanners want to have only minimal raw stock inventory to tan. The Shangdon and Fujian areas are said to be vulnerable targets. We have been advised that sometime local EPA authorities will even go around and make “night checks” on suspected non-compliant tanneries.
There have already been multiple tannery closings in some area’s such as Hebei, and contract tanners are operating on a volume basis to provide blue for those that have closed.
Payless Bankruptcy trickle down affects
The filing for Chapter 11 bankruptcy by Payless Shoe stores is likely to have a negative effect on the tanning industry in China and elsewhere. The Company has listed creditors mostly made up of footwear industry players but as one tanner said today, if these shoe factories that we sell can’t pay us because they lost too much on Payless, how can we continue to operate??
EXPORTS
Raw Hides sales down 40%
Net sales of raw hides for the period ending Marc 30th were 225,900. This is down 40% from last weeks 376,700 pieces and 34% below the previous four week average.
Exports of 470,100 pieces reported. This was up 14% from the previous week and 18% from the prior 4-week average. Destinations were:
| China | 119,400 |
| Korea | 31,300 |
| Taiwan | 30,900 |
| Mexico | 30,100 |
| Brazil | 5,900 |
| Vietnam | 4,100 |
| Japan | 3,400 |
Wet Blue sales jump
Net sales of 216,400 were more than double last weeks 107,000 and were up 74% from the previous four week average. Destinations were:
| China | 84,500 |
| Italy | 72,900 |
| Mexico | 31,400 |
| Thailand | 12,600 |
| Taiwan | 10,400 |
| Vietnam | 4,700 |
Exports of 139,300 wet blues for 2017 were down 14% from the previous week, but up 1% from the prior 4-week average.
Combined outstanding down 5%
Combined raw and wet blue outstanding for the reporting period ending March 30th totaled 3,208,000. This is down 5% from last weeks 3,374,100 pieces. Two weeks ago, 3,471,300 were outstanding.
Combined Shipments up 6%
Combined raw and wet blue shipments for the period were 609,400. This is up 6% from last weeks 575,800. Two weeks ago, shipments were 530,200
Slaughter exceeds sales/shipments above
Export sales totaled 442,300, Adding an estimated 35,000 hides consumed domestically and the total becomes 477,300. Slaughter for the relative period was 593,000. Shipments for the like period were 609,400.
Therefore, slaughter surpassed sales by 115,700 pieces but shipments exceeded slaughter by 16.400 pieces.
Wet Blue Splits
Net sales of splits totaling 176,800 pounds resulted as increases for China (180,300 pounds) were partially offset by reductions for Vietnam (3,400 pounds). Exports of 54,000 pounds were down 92% from the previous week and 91 % from the prior 4-week average. The destinations were China (50,000 pounds) and South Korea (4,000 pounds).
FORECAST
After all of the travel and the excitement of the APLF , we still see ample supplies of hides for sale this afternoon. This leaves us with a bearish bias.
Tale of the Scale
We are again leaving the scale of supply and demand titled to the left again today. Unless we see some surprisingly strong export numbers released by the USDA next Thursday, our impression remains that producers typically need to sell more hides and blue than tanners need to buy.
 3.10.17 |
3.17.17 |
3.24.17 |
3.31.17 |
4.7.17 |
How was last week’s forecast?
Excellent. We correctly foresaw lower prices on all selections and that’s what occurred
And for the coming week
We again think that will see lower prices on just about all selections in the week ahead
The bears continue to smile as prices declined again this week They say that kills that are about to significantly increase. The winding down of the footwear selling season, as well as some accessories, is creating a supply surpassing demand situation, and with it lower prices to continue.
The bulls say the current decline, often known as the Hong Kong dip will soon run it’s course and prices will stabilize. There is still a good demand for hides as too many tanners have been cautious in their buying and are still in need of inventory. In short, latent demand is abundant
MARKET OBSERVATIONS
How long will the buyers market continue?
Tanners appear to be firmly in control of the current market. Our impression is that there are few if any who want any hide inventory coming into the summer months. and why should they?
This is why the term “Hong Kong Dip’” gained notoriety some years, ago, but it really has nothing to do with the APLF Fair in Hong Kong. It’s merely coincidental that prices tend to fall as the primary leather buying season for footwear brands especially, (still about 55% of leather consumption) slows down in late Spring and early summer. As one pundit notes, the hides that will be made into footwear for the back to school/fall selling season are already in the process of being transported to and being processed by tanneries to make into leather to supply shoe makers.
This year there is more rationale for tanners, in China to operate conservatively for fear of government crackdowns on pollution issues .Those that are complaint should be ok for the time being, but there are many who cannot afford to do so and they are at risk
Finally, it takes a strong conviction to buy a single more hide than is needed when prices are falling. Buyers typically have the mindset to believe that prices will continue to fall so their logic is why rush to buy until they turn around again. Of course that’s the time when the market bottoms and all those in need rush to buy.
Regardless, this is why we think that tanners are in control of the market be it in China or elsewhere. Prices are still not historically cheap and leather business while not bad, is far from booming in most sectors. We feel that while many tanners have a reasonable open to buy position, they find no reason to participate in the current price climate.
Federally Inspected Slaughter
Federally inspected slaughter for the period ending April 8, 2015 is estimated to be 573,000. This compares to last weeks 593,000 head For the same week a year ago, FIS was 536,000. Year-to-date slaughter is 8,170,000,000 or 6.1% above 7,710,000 a year ago. This means that there have been 46,900 more hides placed on the market so far this year, than last.
Quotes for Success
Spend eighty percent of your time focusing on the opportunities of tomorrow rather than the problems of yesterday.”
–Brian Tracy
PRICES AT THE CLOSE OF TRADING
| SELECTION | WEIGHT | PER PC FOB | LAST WEEK | LAST YEAR |
| Heavy Texas Steers | 62-66 | $68.00-70.00 | $68.00-69.00 | $65.00 – 66.00 |
| Heavy Texas Steers (Heavy) | 70-74 | $70.00-71.00 | $76.00-77.00 n | $71.00 – 74.00 |
| Branded Steers | 62-66 | $65.00-66.00 n | $66.00-67.00 n | $62.00 – 63.00 |
| Branded Steers (Heavy) | 70-74 | $72.00-72.50 n | $72.00-72.50 | $68.00 – 70.00 |
| Colorado Steers | 62-66 | $64.00-64.59 | $65.00-67.75 | $60.00 – 61.00 |
| Colorado Steers (Heavy) | 70-74 | – | – | – |
| Butt Branded Steers | 62-66 | $72.00-73.00 | $74.00-75.00 | $71.00 – 73.00 |
| Butt Branded Steers (Heavy) | 70-74 | $80.00- 83.00 | $78.00 – 83.00 n | $74.00 – $7600 |
| Heavy Native Steers | 62-66 | $74.00-75.00 | $76.00 – 78.00 | $73.00 – 74.00 |
| Heavy Native Steers (Heavy) | 70-74 | $80.00-83.50 | $79.00 – 80.00 n | $79.00 – 80.00 |
| Heavy Native Heifers | 50-54 | $56.00-57.00 | $59.00 – 60.00 | $59.00 – 60.00 |
| Branded Heifers | 50-54 | $54.00-54.50 | $55.00 – 56.00 | $57.00 – 58.00 |
| Heavy Native Cows | 50-54 | $48.50 –50.00 | $48.50 – 50.00 | $42.00 – 43.00 |
| Branded Cows | 50-54 | $38.00 –39.00 | $39.00 – 40.00 | $33.00 – 35.00 |
| Holstein dairy cows | 50-54 | $58.00-60.00 n | $61.00 – 62.00 | $52.00 – 55.00 |
| Native Bulls | 100-110 | $54.00- 59.00 n | $54.00- 59.00 n | $51.00 – 54.00 |
