THE HIDE MARKET - May 19, 2014

Trading was mixed in the U.S. hide market last week. Some suppliers reported a decent sales week, while others said the week was below expectations. Traders continued to lead the market lower, as they were aggressively taking business $1.00 or $2.00 under prices that packers/suppliers would accept. In review, we would have to say the market slid another dollar or two lower for the week. As to actual trading for the week, Heavy Native Steer hides sold at $107.00 per piece FOB plant, and Heavy Texas Steer hides sold at $101 per piece, also on an FOB plant basis. The Cow hide market continued to suffer from the Hebei situation, but apparently that problem is getting settled, as we saw sales made to tanners who previously were delaying hide shipments and purchases. Overall, we would have to say that Cow hide prices, like the steer hides prices, moved $1.00 or $2.00 lower.

The USDA Export Sales Report issued last Thursday May 15, 2014 for sales made during the week ending Thursday May 8th showed a total of 585,500 hides and wet blue sold for export, down from the 776,000 reported the previous week. China/Hong Kong was, again, the big buyer taking 347,000 pieces, and surprisingly Mexico was the 2nd largest buyer taking 86,300 pieces for that week.

The FIS (Federally Inspected Slaughter) for the week ending Saturday May 17, 2014 showed a total of 591,000 head processed, down from the 600,000 of the prior week. For the same week last year, the FIS was 654,000 head.

The tenor of the U.S. hide market continues to be negative, and the reported further drop in split prices last week will not help the tanners’ situation going forward. The only good news for hide values is that kills are lower than expected and some meat experts are expecting further curtailing of the kills, as profit margins for the packers continue to be negative. These slaughter reductions at all the major meat packers will continue to affect the hide supply and take some pressure off the packers to sell hides. As to the tanners/hide buyers, they are facing lower split returns, seasonally slower leather sales, and more financial woes. Despite this, we have some tanners every week coming into the U.S. market to buy hides. So, despite what some are saying, it is not all doom and gloom for the U.S. hide market. Our overall assessment of the market is that it continues to search for a bottom which we think is closer today than it was a week ago.

 A GOLF STORY

A guy comes back home from the golf course, walks in the door, and says to his wife: “Honey, I had a great day and I want to ask you a question. What would you do if I won the Lottery?” She replied: “I would take half the money and leave you.” “Ok that’s great” he says, and replies “Here is $6.00 – I won $12.00 today, so goodbye, good luck and be sure to stay in touch.”