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Summary
U.S. hide exports benefitted from strong foreign demand in 1996, but lower prices resulted in a 14 percent reduction in the total value of hide exports for the year. The United States continues to dominate world trade in hides and is well positioned to increase exports to the high growth markets in Asia and to the niche markets in Europe.
U.S. bovine hide production increased 3 percent in 1996 to just under 1.2 million metric tons, as U.S. cattle slaughter increased to 38.6 million head. Hide production is forecast to decline to 1.7 million metric tons in 1997 as U.S. slaughter is forecast to decline 2.8 percent to 37.5 million head.
U.S. hide exports on a volume basis were up slightly in 1996 at 675,000 mt. However, the value of U.S. cattle hide exports was down 14 percent to $1.245 billion. The reduction in the value of hide exports is explained by lower hide prices due to greater supplies last year. According to U.S. Census, the average unit price of whole hide exports was $55/piece, down 10 percent from 1995. The unit value of calf and kip skins was 19 percent below 1995 levels at $30/piece. Cattle hide prices are expected to move higher during 1997, with U.S. cattle and calf slaughter forecast down 2 and 18 percent, respectively. In addition, foreign demand for U.S. hides is expected to remain strong. Already the price of heavy native steer hides hovers near $80/piece compared to $62/piece a year ago.
The reemergence of Mexico as a robust market for U.S. hides was among the highlights for 1996. Total hide exports exceeded $110 million, double that of 1995. Whole hide exports were particularly encouraging, exceeding that of 1994, pre-peso devaluation, at $102 million. With economic recovery taking hold, Mexican imports are forecast to increase another 7 percent in 1997.
After increasing sales by more than 100 percent in 1995, U.S. whole hide exports to China increased another 14 percent to $89 million in 1996. China's hide utilization rate continues to grow at an astonishing rate. From 1994 to 1996, China's tanning and processing capacity grew from 378,000 tons to 580,000 tons, or 57 percent. The current forecast is for China's utilization rate to reach 630,000 tons in 1997. This would make China the largest processor of hides, ahead of the United States and Italy.
Korea remained the largest market for U.S. hides, accounting for approximately 40 percent of all U.S. hide exports last year, compared to 43 percent in 1995. The movement of tanning facilities to countries with lower labor costs continues to erode Korea's utilization rate which has been in steady decline since 1990. In 1996, the government reduced the import tariff on hides from 3 percent to 1 percent in an effort to stabilize the domestic leather industry.
U.S. hide exports to Taiwan, Hong Kong, and Thailand all growth markets for U.S. hides in 1995 were off in 1996. Sales to Taiwan were down 13 percent to $174 million. The same wage constraints at work in Korea are also driving tanning capacity from Taiwan, principally to China. Thus, the tanning sector, and footwear production in particular, is considered a declining industry on the island. Exports to Hong Kong and Thailand were down 19 and 39 percent, respectively.
Italy and Spain remained attractive markets for U.S. hides in 1996. Exports of whole hides and calf and kip skins to Italy increased 43 percent and 22 percent, respectively, for a combined total of $58 million. U.S. exports to Italy are up 53 percent from just two years ago. Whole hide exports to Spain were off 19 percent to $9 million, but a 3-fold increase in exports of calf and kip skins more than compensated. Competitively priced calf and kip skins displaced some whole hides for use in high quality leather products.
U.S. hide exports for 1997 are forecast to decrease 3.5 percent in 1997 due to tight supplies and higher prices. Nonetheless, with many major processors of leather and leather products dependent on imports to maintain their capacity, the outlook for U.S. hides remains bright. China in particular bears close watching. Although Chinese cattle slaughter is estimated at 137 million head, inefficiencies in slaughter and rendering suggest that continued expansion in tanning capacity will have to be supplied almost exclusively by imported hides.
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