Hides and Skins
Lower slaughter, stable U.S. domestic consumption, and a growing Asian demand for U.S. hides should increase U.S. hides prices to even more profitable levels.
Revised production figures for countries tracked by USDA indicate that bovine hides and skins production increased again in 1999. Slight gains in the United States, Brazil, Argentina, and Canada, and a substantial increase in Chinas hide production during 1998 and 1999 led the increase. Production is projected to increase in 2000 despite lower slaughter rates in the United States, the EU, Argentina, Russia, and Australia. Of the major producers, Brazil, China, and Mexico are expected to increase their production this year.
The volume of hides and skins imports in countries tracked by USDA increased 7 percent in 1999 and is projected to increase another 3 percent in 2000. Further import growth is anticipated in China, Korea, Thailand, and the EU. Of the countries tracked by USDA, China, the EU, Korea, Taiwan, Thailand, and Mexico (in that order) account for over 80 percent of total imports.
U.S. production of bovine hides in 1999 was about 1 million tons. Due to a decline in cattle slaughter, hide production is projected to drop slightly to 993,000 tons in 2000.
U.S. monthly weighted average hide prices were in the $62-64/cwt doldrums during the first half of 1999, then perked up during the autumn to reach $73/cwt by December. Total bovine slaughter is projected to drop 1.5 percent in 2000 which will likely increase hide prices during the summer and autumn. While many countries prefer U.S. hides and increase their purchases when U.S. prices fall and become competitive, they seek alternative sources when U.S. prices rise.
The volume of U.S. hides and skins exports continued to slide in 1999, totaling 436,000 pieces compared to 443,000 the previous year as demand for U.S. product declined in key markets including China, Japan, Italy, and Canada. Lower export volumes and the low hide prices early in the year contributed to a decline in the value of U.S. hides and skins exports to $914 million in 1999, compared to $960 million in 1998.
On the bright side, the volume of U.S. hides and skins exports increased to Korea (24 percent), Taiwan (6 percent), and Thailand (2 percent). While the increase to Korea is promising, and perhaps indicative of some recovery in this key Asian market, Korean imports are still well below pre-economic crisis levels.
In 2000, lower slaughter rates coupled with high domestic consumption from the U.S. auto industry for new car leather upholstery will reduce the availability of hides for exports, and U.S. hide exports are projected to drop to 427,000 tons in 2000.
While U.S. bovine hides and skins exports remain weak, demand for U.S. wet blues were strong in 1999, and exports increased 11 percent over 1998 to $250 million. Total U.S. exports of raw bovine hides and wet blues amounted to almost $1.2 billion with wet blue hides accounting for 22 percent of the total, up from 19 percent in 1998.
Tables in this circular only count bovine hides and skins and do not include wet blues.
Wet blue hides are preferred by many tanners because of their suitability for high-quality shoes and bags and the lower level of pollutants generated during the tanning process. Almost 83 percent of U.S. wet blues are exported to Korea, Italy, China, Taiwan, and Hong Kong. Korea is by far the largest importer with 1.3 million pieces in 1999, a 56- percent increase over the year before, followed by Taiwan with almost 900,000 pieces. Although still small, exports of grain split wet blues for automobile upholstery to South Africa increased dramatically to 94,000 hides in 1999.
Major Markets for U.S. Hides
Italys tanning industry shrank as exports of shoes and leather items dropped in 1999 due to a global decrease in demand for luxury goods. As a result, the volume of Italian imports of hides and skins dropped 13 percent below 1998 levels with Italian imports from the United States down 37 percent for cattle hides and 25 percent for calf and kip skins on a volume basis. The latter is particularly important since Italy consumes over 40 percent of all U.S. calf and kip skin exports. Italian imports are expected to increase only slightly, from 215,000 tons to 220,000 tons in 2000.
Japans slow economic recovery has shrunk leather products manufacturing, a situation that will likely remain unchanged in 2000. Imports of U.S. hides and skins still account for 74 percent of Japans total raw hide and skin imports; however, price hikes for U.S. raw hide during the latter part of the year hampered Japanese tanners abilities to take advantage of favorable exchange rates against the U.S. dollar.
Korean imports of raw hides and skins showed some improvement, and Asian markets are now increasing demand for finished leather products. Korea remains by far the largest market for U.S. hides and skins and wet blues, accounting for approximately 33 percent of U.S. raw and wet blue hides sales.
Koreas restructured tanning industry, which saw 20-25 percent of its members exit the business during the financial crisis, is now more financially stable and is expected to increase imports 2-3 percent in 2000. The tanning industry learned its lessons from the economic crisis and is now attempting to expand and upgrade. In addition to its traditional markets in Asia and Russia, Korea is targeting Western Europe and the United States.
Taiwan replaced Mexico as the second largest importer of U.S. cattle hides after Korea and the largest importer of U.S. grain split wet blue hides. U.S. market share grew to 73 percent in 1999. The export value of hides and skins exports to Taiwan was over $150 million, and wet blues added nearly $50 million more. Although the total volume of U.S. bovine hides and skins exports decreased in 1999, exports of U.S. bovine hides and skins to Taiwan increased by 6 percent.
Taiwan is one of the worlds leading producers of footwear. Although the past 10 years has seen many of Taiwans shoe manufacturers move their operations to China due to lower production costs, shoe manufacturers still like the quality of Taiwanese-tanned leather, and demand for it remains strong.
Over 70 percent of Chinas leather producing enterprises are located in east and central China, and the majority are small, labor-intensive firms which, in general, suffer from poor technology and insufficient high-quality raw materials. The hides commonly used are irregular in shape with abrasions and have a rough grain. Consequently, the demand for high quality hides in Chinas finished leather products industry far exceeds supply, necessitating imports.
Chinas imports of bovine hides are projected to increase almost 3 percent to 650,000 tons in 2000. Since U.S. hides account for about one quarter of Chinas hide imports, any increase in demand represents an opportunity for U.S. hide exporters. In 2000, however, likely higher prices for U.S. hides will probably limit U.S. hide sales to China. U.S. hides have a reputation for high quality in China, and some Chinese hide importers have expressed interest in forging closer ties with U.S. hide producers in order to circumvent costly middlemen in Taiwan and Hong Kong.
Hong Kongs imports of bovine hides and skins increased about 30 percent due to the increased demand for manufactured leather products overseas. During 1999, the value of U.S. raw hides and skins exports to Hong Kong decreased 2 percent to $17 million, while exports of wet blue hides increased by 60 percent to $38 million. Unless U.S. hide prices increase to uncompetitive levels, better economic conditions in Europe and continued import absorption in the United States should boost demand for Hong Kong-manufactured leather products.
In Australia, reduced slaughter in 1999 led to a decrease in hides and skins production, and, with utilization stable, exports should decline. Approximately 70-80 percent of production is exported, mostly to Asian markets. Slaughter is expected to fall again in 2000, further reducing production and domestic consumption while lowering exports.
Brazil continues to be the worlds second largest hide producer after the United States, and the outlook for 2000 calls for a 5-percent production increase and a 9-percent increase in exports to about 250,000 tons. About 75 percent of Brazils hides and skins export volume is "wet blues", and Italy continues to be its major market taking 35 percent.
Note: Beginning with publication of the October 2000 "Livestock and Poultry: World Markets and Trade", commodity and country analysis and tables for tallow and grease, hides and skins, and sheep will be discontinued. This decision was made in response to discussions with the relevant U.S. industries, surveys of FAS overseas offices, and other feedback. The Dairy, Livestock and Poultry Division will continue to monitor and analyze market developments relating to these commodities and will continue to publish the results of our analysis through International Agricultural Trade Reports and other means. The latest information will be posted on the DLP Home Page: www.fas.usda.gov/dlp/dlp.html
For further information, contact Josť Rivera, (202) 720-1349.