WEEK IN REVIEW

Packers offered far fewer steers than normal, and with one exception, steer prices were steady. Cows were easier with less than good demand. Over all it was a quiet week with a sense that more hides were produced than sold.

Heavy Texas up $1.00

The number of Texas steers changing hands this week appeared to be far fewer than normal. This was not necessarily due to any lack of demand, but more so due to very limited if any offerings by major producers. The first sales reported by Wednesday were at $74.00 and this price was maintained throughout the week, again, in limited volume. A few lots of jumbo Texas sold at $78.00 on minimum 70 lb. averages. Some trader business was heard to have taken place at $79.00 c&f, but packers typically rejected anything below $80.00 c&f net.

Branded steers steady

Prices of 60/62 lb. average branded steers remained steady with the highs of last week. Sales were made at $73.00 throughout the week, although as in the case of Texas, quantities appeared to be considerably less than normal. Better volume could have changed hands at a dollar or two less had their been any willing sellers and there were not. A sale or two of heavy western averages was seen at $75.00. Tanner attempts at $77.00 c&f net were rebuffed by sellers, and the highest price heard was at $79.00 c&f net.

Butts steady to softer

Volume in butt branded steers was diminished like other steer selections. Prices that reached a high of $74.00 did so again this week, but there were also some trades posted at $73.00, which would be down a dollar. There were not any export sales of butts reported.

Heavy native firmly steady

While not as keen as the previous week, demand for heavy native steers sold relatively easily at $75.00, which was steady to previous highs. Nearly all that were sold went to domestic automotive tanners who did not need to buy in enough quantity to push prices any higher

Heifers steady

Heifers appeared to be the most voluminously traded selection this week. Heavy natives sold in relatively good volume at both $64.00 and $65.00 depending on origin. Later in the period, a choice offering traded at $65.00. Branded heifers sold between $62.00 and $63.00 on the river and in the Panhandle area up to $64.50.

Plump cows easier

While there was an ample supply of cows offered onto the market this week, enough buyers were lacking. This resulted in a low volume of trades. Conventional natives were reported at $40.00 and processor heavy natives sold at $48.50; steady to the lows of last week but considerably below the top reached from a premium origin at $52.00 last week.

Branded cows sold in limited volume between a low of $37.00 in the west to a high of $41.00 from more northern points. $43.00 was bid in the Far East on 48/50 lb. brands

Holsteins steady

Reported trades were few in dairies this week. Northern type cows sold at $55.00, or in line with a week earlier, with offerings at $63.00 c&f not finding any buyer interest.

Skins quietly steady

Provimi type kip were another selection that was quiet. An offering of 25/35’s at $67.00 was seen but we were unable to confirm any sales. Both supply as well as demand remained limited. Fleshed packer sows were steady with most origins trading in and around $7.50 Laredo depending on average and origin.

Bulls firm

Native bulls sold at $55.00, or steady with last week but an unconfirmed report was heard of a sale at $57.00. Other natives with a sizeable Holstein content sold at $60.00. A sale of branded bulls was seen into Mexico at $53.50 delivered Laredo.

Small packers firmly steady

Fewer offerings were seen this week, but buyer interest was less than prevalent as well. 58/60 lb. natives were bid at $52.00 Laredo and passed by the producer. A bid at 49.00 fob on the same average but with a very small brand content was seen at $49.00 and countered. Processors reported difficulty in finding conventional accumulations.

Low grades soft

Increasing numbers of low grades were offered this week as tanners displayed little interest. While demand for better leather grades remains strong, there appears to be an abundance of lower grade material accumulating in many tanner inventories. Renderer no. 3’s were bid at $25.00 and countered at $29.00.

Splits

Mostly branded 15/+ kg whole hide drop splits were reported to have sold at $1.35 c&f. Others were offered at $1.40 and one packer reported a sale at $1.35/kg. c&f.

INDUSTRY NEWS

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Nike sales up

Nike Inc. reported sales grew 8% in the fourth quarter ended May 31, to $5.1 billion from $4.7 billion for the same period last year. Excluding changes in currency exchange rates, net revenues were up 4% compared to the same period last year

For the full year, sales fell 1% to $19.0 billion, compared to $19.2 billion last year. Excluding currency changes, net revenues were down 2% for the year. Fourth quarter net income increased 53% to $522 million

Finish line sales increase

The Finish Line, Inc. reported sales climbed 9.0% in its first quarter ended May 29, to $282.4 million from $259.1 million a year ago. Comps climbed 10.9% compared to a 3.9% decline for the same period a year ago. Income from continuing operations significantly improved to $13.7 million.

SRL to exit garment leathers

In a press release today, Shanghai Richina Leather Co (SRL) announced plans to cease ovine leather production operations effective Friday, September 3, 2010.

The SRL garment division produces lambskin leather from New Zealand and North African pelts primarily for the US and European premium leather jacket market. The division employs 310 workers.

According to Bob Moore, Shanghai Richina’s CEO, ‘SRL’s focus today is on building and growing our auto, footwear and accessories leather businesses. These operating groups, to be vertically aligned with SRL’s new Fuxin wet-blue production facility, will allow us to more effectively expand and grow our bovine business volumes and profitability.’

Shanghai Richina Leather is headquartered in Shanghai, China and produces automotive, footwear, accessories and garment leather for global brands including Toyota, Citroen, Peugeot, Cole Haan, Johnston and Murphy, Merrell, Clarks, Born, HH Brown, Sperry Topsider, Wolverine, Coach and others.

Chinese government starts to implement small tannery closings

During the first week of June, the Sichuan provincial government announced a plan to eliminate outdated production capacity in the province. Vice Governor Li Chenyun on behalf of provincial government signed a responsible agreement with 21 affiliated municipal governments on reaching the targets of backward production elimination. As per the agreement the tanneries with annual production less than 30,000 pieces of leather will be closed before the third quarter of this year.

Little ramifications seen so far of floating Yuan

China lowered its U.S. dollar central parity rate to 6.7980 yuan on Tuesday from 6.8275 yuan the previous day after allowing the local currency to sharply appreciate in the spot market on Monday. The lower dollar-yuan parity level comes in the wake of the central bank's decision over the weekend to remove the yuan's de-facto peg to the dollar.

On any given day, the central bank allows the U.S. dollar to move 0.5% in either direction from the central parity rate, while permitting a 3% move in other currencies versus the yuan. Among other currencies, the China Foreign Exchange Trade System set the euro parity for the day at 8.3816 yuan from 8.4825 yuan and the British pound parity at 10.0372 yuan from 10.1382 yuan.

The Chinese authorities allowed the renminbi to appreciate modestly on Monday in the first day of trading since the end of the near-two-year currency peg with the US dollar was announced.

However, in a follow-up statement on Sunday, it stressed that a substantial appreciation in the currency was “not in China’s interests” and that the exchange rate would remain “basically stable”.

Australian hide market

Figures received from Australia this week show that cattle hide prices rose 19% to $60.8 million between January and March compared with the same period in 2009, although this is still relatively low compared with prices prior to the global economic downturn. Hide exports fell 53% in volume during the first three months of the year to 1.9 million pieces. Adult cattle slaughter fell 6% to 1.8 million head.

USDA wants to change livestock sales regulations

The USDA announced a proposed rule this week that, if adopted, would result in sweeping changes to how livestock are marketed and procured by meat packers. The proposed rule, characterized by Agriculture Secretary Tom Vilsack as “aggressive,” was mandated by the 2008 Farm Bill.

EXPORTS

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Raw hides

Net sales of raw hides for the period ending June 17th totaled 292,200 pieces. This was 58% below last week and 38% under the previous four-week average. Destinations were:

Korea	101,300
China	54,600
Thailand	32,100
Vietnam	23,200
Taiwan	22,100
Japan	19,200
Hong Kong	14,500
Germany	10,800
Italy	7,500
Canada	1,900
Indonesia	1,600
Argentina	1,100
Holland	-0-	5,500 kip
France	-0-	4,100 kip

Weekly shipments against previous sales totaled 422,500 pieces. This was 20% below last week and 14% under the previous four-week average. Outstanding sales totaled 3,575,300 raw hides. This is down from last weeks 3,712,500 pieces but up slightly from 3,530,700 two weeks ago.

Wet blue

Net sales of wet blue hides for the period were 159,100. This was 23% over the previous four-week average. Destinations were:

China	77,600
Vietnam	39,600
Dom Rep	19,000
Mexico	17,200
Taiwan	4,700
Thailand	700

Weekly shipments were 141,800. Outstanding orders still to be filled totaled 592,400. This is up from 575,100 last week but lower than 635,700 two weeks ago.

Combined raw and wet blue exports down 2.7%

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The combined total of raw and wet blue outstanding for the period ending June 17th was 4,167,700 pieces. This is down from last weeks 4,287,600 but almost identical to the total two weeks ago, which was 4,166,400.

New raw/wet blue sales and shipments below slaughter

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Combined raw and wet blue new sales for the period totaled 451,300. Shipments were 564,300. Add in about 35,000 domestic consumption and the total is 599,300.

Meanwhile approximate slaughter for a similar time frame was 677,00 head. Therefore, both new sales and shipments were below slaughter, as they have been for most of the year.

Splits

Net sales of wet blue splits were 243,400 lbs. 193,800 lbs went to Korea, 25,800 lbs. to Indonesia and 23,800 lbs. to China. Shipments were 129,500 lbs. Outstanding sales totaled 2,274,500 lbs. This is up from 2,160,500 lbs. last week and 2,144,300 the week before that.

FORECAST

TALE OF THE SCALE

Supply and demand seem to be fairly well in balance this afternoon on steers. In cows, we think more need to be sold than there is interest to buy by tanners. Using only steers, the scale is in balance.

5.14.10

5.21.10

5.28.10

6.4.10

6.11.10

Our Tale of the Scale FORECAST is proven to be accurate more than 85% of the time!

FRIDAY AFTERNOON FACTOR

It is difficult to convince tanners to sell additional quantities of steers today, but it’s equally as hard to find bids, even at prices steady to last paid. As previously noted, major steer producers were reluctant to put themselves any further forward, but we doubt that they will retain this posture much longer. This leaves us to have a neutral to slightly bearish posture today.

In native and branded cows, quite simply, there are more to buy than there are bids and for this reason, we have a bearish bias on this sector.

How did we do?

In our forecast last week, we anticipated an increase in steer prices of a dollar. While we were right on Texas, we were wrong on the other selections. We did expect to see the cow sector steady, and in this area we were generally correct.

And for the coming week?

As noted, major steer producers offered very few hides this week due to their well forward sold position. By the same token, buyers were not aggressive. While we think the need to buy still exists in greater than normal quantities, we feel that, as the saying goes, “the bloom is off the rose.”

We don’t think that there will be enough buyers wiling to pay anything over $80.00 c&f net, which calculates back to about $74.00 fob for any type of steers, with the exception of natives. By the same token, we sense that packers will not need to accept any bids that are below their last sales levels. This leads us to conclude that steer prices a week from now should be at about the same as they are today.

We sense that pressure is building again to a point on cows, that some declines are likely and we would not be surprised to see native and branded cows lose a dollar perhaps as well. In our opinion, all other selections will do well, to hold their own.

The economy and the hide market

Marketwatch reported that U.S. real gross domestic product for the first quarter was revised down to an increase of 2.7% annualized from the earlier estimate of a 3.0% rise, the Commerce Department said today. The revision to first-quarter GDP was largely due to weaker consumer spending and a widening trade deficit. Corporate profits increased a revised 8.0% quarter-to-quarter, compared with a 5.5% rise previously estimated.

More than a few of China’s very large furniture upholstery manufacturers (both leather and cloth) say their business is still very poor. As noted in our last issue of This week in leather the latest reports of existing and new home sales was lower in May

There are for more signs that some of the “boom” or recovery or whatever term one wishes to use is not as strong as it was earlier this year. Reports of large profit increases for public companies are not currently, nor are they apt to be as good in the third and fourth quarters of the year in too many cases.

Our take on this is that the depleted inventories are catching up as sales begin to slow after the catch up phase in the closet, shelf, and tannery. The stock market is reflecting this as well.

If, as we sense, the economic benefits of the re-stocking phase is now grinding to a halt, or at least slowing considerably, this would indicate that demand for leather products could slow as well.

So for the hide market?

Given the above, we could very well be at the top of the trading range. It’s quite possible that we’re getting to the point where if someone who deals in hides or leather would be better off in selling at the current market with the hope of covering those sales some weeks hen

SLAUGHTER

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Federally inspected slaughter for the week ending Saturday June 16 is estimated to be 667,000 head. Last week’s total was 667,000 and for the same period last year 670,000. Year-to-date slaughter is currently 1.9%, or 148,000 head below a year ago at this time.

QUOTES FOR SUCCESS: "The person who gets the farthest is generally the one who is willing to do and dare. The sure-thing boat never gets far from shore." - Dale Carnegie

PRICE GUIDE SELECTION WEIGHT PER PC FOB LAST WEEK LAST YEAR Heavy Texas Steers 64-66 $74.00-75.00 $73.00-74.00 $38.00-39.00 Branded Steers 64-66 $73.00-74.00 $73.00-74.00 $34.00-35.00 Colorado Steers 64-66 $70.00-71.00 n $70.00-71.00 n $29.00-31.00 Butt Branded Steers 64-66 $73.00-74.00 $73.00-74.00 $36.00-37.00 Heavy Native Steers 64-66 $75.00-76.00 $74.00-75.00 $38.00-40.00 Heavy Native Heifers 50-52 $63.50-65.00 $63.50-65.00 $28.00-30.00 Branded Heifers 50-52 $62.50-64.00 $62.50-64.00 $25.00-27.00 Heavy Native Cows 50-52 $48.00-49.00 $49.00-52.00 $24.00-25.00 Branded Cows 50-52 $37.00-41.00 $40.00-41.00 $15.00-18.00 Spready Dairy Cows 50-52 $54.00-55.00 $54.00-55.00 $25.50-26.50 Over-weight Kip 20-35 $64.00-65.00 $64.00-65.00 $49.00-51.00 Native Bulls 95-105 $55.00-57.00 $54.00-56.00 $23.00-24.00