US leather market: not bad the outlook for 2018U.S. Hides and Skins market situation. Last year US exports showed an increase of 7% in value for salted hides, but a decrease of -4% in wet blue. The outlook for next months will depend on the rate of recovery in global demand for leather.
The U.S. hides and skins market muddled through 2017 without too much difference from the previous year. Prices were generally flat or lower for various selections, though the overall availability of supply was higher than in recent years due to a larger cattle herd. Exports of salted hides were higher as a result of the increase in supply, and with the exception of Italy and a few other markets, most tanners preferred to purchase salted hides instead of U.S. wet blue.
The expansion of the U.S. herd is expected to continue in 2018, albeit at a slower pace. Trade between the U.S. and India decreased slightly for 2017 as well, but there are still many opportunities available to be explored between the two industries in 2018 and beyond for increased trade.Through November 2017 (the latest statistics available from the U.S. Department of Agriculture at the time of this writing), the U.S. exported over $1.36 billion in salted/brine cured cattle hides and another $529 million in wet blue products. These values represent an increase of 7% in value for salted hides, but a decrease of -4% in wet blue from the same period in 2016. Less U.S. hides were processed into wet blue prior to export in 2017, continuing a trend that began in 2016. China continues to be the largest market for U.S. hides and skins exporters. Combined with Hong Kong, China imported approximately 55% of all U.S. salted/brine cured hide exports and 32% of wet blue exports by volume. Salted hide export values to China were $792 million through November 2017 (2% above the same period in 2016) and wet blue export values were over $159 million (a -12% decrease).
U.S. salted/brine cured hides export values increased to most other major tanning markets in 2017, such as Korea, Mexico, Thailand and Taiwan. Exports to Korea were up 9% in value through November 2017 to $232 million, up 3% to Mexico to $114 million, up 113% to $94 million in Thailand, and up 14% to $38 million in Taiwan.
The Italian market experienced reductions of -33% for salted hides, down to $15 million, as more Italian tanners opted to import U.S. wet blue instead. Indonesia witness a spike in salted hide imports, jumping 367% to $11 million in total imports for the time period.
In wet blue, U.S. exports overall saw a slowdown through November 2017 in almost all major markets, with exceptions in Italy and Taiwan. Exports to China/Hong Kong decreased -12% to $169 million, -6% in Vietnam to $83 million, and -14% in Thailand to $18 million. However, both Italy and Taiwan rose significantly as tanners in each country opted to begin their processes with wet blue rather than wet salted hides.
Exports to Italy were up 38% to $204 million and 62% to $25 million in Taiwan. Salted/brine cured hides exports to India decreased -29% to $2.1 million value, while wet blue exports fell to $3 million in value (a -6% drop).
In 2018, the number of cattle hides available for export in the U.S. is expected to be plentiful. For several years the U.S. cattle herd has been experiencing an expansion, with total levels reaching somewhere around 95 million head at the beginning of 2018. Slaughter levels have likewise increased as the herd has grown, up between 5 – 6% for most of 2017, which is also expected to continue into 2018.
More important in the eyes of many U.S. hides and skins suppliers, though, is the global leather demand situation.
While automobile leather usage continued to expand in 2017, utilization of leather in the global footwear and accessory brands continues to be sluggish. Cheaper oil prices are also reducing the cost of synthetic materials, increasing competition for leather and driving prices lower.
Much of the outlook for 2018 will therefore depend on the rate of recovery in global demand for leather. In 2017, total U.S. cattle slaughter was up approximately 5.4% to 31 million head compared to 2016. This increase in slaughter is expected to continue in the new year. However, this trend is expected to slow sometime in mid to late 2018 as the U.S. herd growth may also start to slow down due to cyclical business factors. The herd rebuilding effort in 2018 will depend on Nature’s cooperation.
Good weather promotes herd growth by providing adequate rain in key sections of the US (such as the Midwest and Great Plains) which produce ideal grazing conditions for increased calf production. However, should drought develop in these regions, grazing conditions may deteriorate and ranchers will be forced to send their cows to slaughter before calving. ùDrought also wreaks havoc on feed crops such as maize and soybeans, significantly increasing the price of feeding the animals and forcing them into early slaughter.
Beef prices have also been very high by historical standards recently, which gives further incentive to continue herd growth and increased slaughter levels. The average U.S. consumer is expected to consume a record amount of meat in 2018, a record that has not been matched since 2014.
by Stephen Sothmann
president U.S. Hide, Skin and Leather Association USHSLA