WEEK IN REVIEW

Prices were essentially steady on all about all selections this week as producers were unable to push prices beyond previous levels. It appears however, that over-all sales were below production.

Texas steady

Sales of heavy Texas steers seemed to be moderate at best. Producers rejected any lower bids, and buyers refused to increase their ideas. Sales on averages between 62 and 66 lbs. were concluded for the most part at $67.00. This was steady to the past two weeks. On a c& basis, sales were posted on seasonal averages in and around $74.00 depending on origin and terms. Jumbo Texas, averaging 72/74 lbs sold at $70.00, which was also steady with late January.

Branded softly steady

While a good many branded steer sales took place at $67.00, or steady to last week, some business reported yesterday and today was between $66.00 and $66.50. Averages were between 62 and 66 lbs. Heavier weights traded at $67.00 for the most part. Prices seen in the Far East were generally between $72.00 and $73.00 c&f. A few sales of Colorado’s were posted between $63.00 and up to $64.00 on heavier weights. This was steady to somewhat firmer at the top of the range.

Butts unchanged to slightly easier

Trading was reported at $67.00, early in the period and steady with a week ago. Somewhat lighter averages sold at $66.00. Business on a c&f basis, and in relatively small numbers, was heard at $73.00 to $74.00, as always, depending on terms and averages.

Heavy native steers steady

Seller attempts to work prices higher fell on deaf ears this as buyers were only interested, and then in less than abundant numbers, at prices that were at best, steady with last week. There was a sale or two posted at $70.00 on heavy averages, but other bookings were done at $67.50-$68.00. $68.00 seemed to be the most prevalent trading level throughout the period. Over seas, trades were reported at $77.50 on heavier averages.

Heifers firm on little supply

Trading was minimal in heifers again due to a lack of supply as much as anything else. We did pick up some sales however as high as $60.00 on native heifers that matches the highs of last week. In brands, $58.00 was reported but could not be confirmed. A direct packer offering on southwestern Texas type brands was seen at $66.00 c&f or about $60.00 fob but we did could not any bookings at that level.

Plump cows still very firm

Offerings were less than abundant as producers remained well forward. The highest price heard for the better northern heavy native cows were at $48.00 on natives. This was steady with last week. Less desirable origins also traded at levels similar to last at prices in and around $46.00 for the most part.

Branded cows sold in limited quantities, again, due mostly to high prices on few offerings. Business was reported to be booked at $36.00-$38.00, depending on origin and average, in the west and southwest. More favored origins sold up to $40.00.

Holsteins soften

Producers remained very well forward sold but regardless, buyers began to show more resistance to producer asking prices. One sale was posted at $56.00 and another at $54.00. This is as much as $2.00 below last week, but it should be noted that the number of sales was limited to the extent that it became difficult to ascertain a true market value.

Skins steady

The market for provimi type kip and over weights lost some of its firmness doing the week, due more to the French market as much as what buyers were willing to pay for US production. The dollar went against the local market as well.

The 35/45 range over weights were bid at $63.00 c&f along with 25/35’s at $59.00. The buyer claimed he could buy Europeans at that basis, which he did, but producers were well forward enough to not even counter at such bidding levels.

Prices for fleshed packer sows were steady between $7.00 and $7.50 Laredo depending on average and origin.

The few remaining lots of heavier average white tail deer skins were available at $11.00 c&f but it appeared to be too far above buyer idea’s to result in any sales.

Small packers

Ever increasing higher asking prices to some extent discouraged bidding, but it could also have been caused by the approaching Lunar New Year with pending shut downs in many Asian countries. Asking prices on 60/62 natives at $47.00 deterred interest as did $53.00 on 63/65 lb. brands. 58/60 lb. averages were bid at $42.00 and passed as were 60/62 lb. averages at $44.00.

INDUSTRY NEW

Las Vegas Shoe Show

Several participants at the semi-annual Las Vegas WSA shoe show this week said that the event keeps getting smaller at each edition. The twice year event still had over 20,000 visitors.

The organizers have not yet released what is sure to be their tale of success. However, one observer noted that attendance along with the number of exhibitors appeared to be in the area of 20% less than the previous show. This is an ongoing trend for the Vegas show. Just several years ago, the event required venues at the Las Vegas and Sands Convention center and the then newly opened Mandalay Bay convention center. This year, it all fit into the Mandalay.

Another report at the show was heard of more and more synthetics being shown in women’s’ boots. Manufacturers have done an excellent job in copying leather with synthetics such as newbuck and full grain footwear. Then there was the usual array of finished splits in all sorts of fashions as well.

WSA said that buyers at the show were made up of 30% Specialty independent footwear retailers, 16% Boutiques (apparel with footwear), 16% Mass merchandisers/discounters, 10% Specialty chain footwear retailers, 8% Buying offices/others, 8% Department stores, 7% Mail order/catalog/ecommerce/company/factory outlets, and 5% Athletic/general sporting goods retailers.

Leather upholstery at Las Vegas Furniture Show

Our Lee Corson covered the World Market furniture show in Las Vegas this week. His report shows the place of leather in upholstery sales. The story will be in our next edition of This Week in Leather, but can also be sent to you by emailing us at info@hidenet.com.

Leather Forum in Brazil

Richard Smith, for APLF Latin America wrote the following report on the recent CIBC forum. His complete report can be found at http://www.fashionnetasia.com/en/IndustryNews/BusinessResources/Detail.html?id=1244

Organized by the Brazilian Tannery Association (CICB) and supported by the Brazilian Export Promotion Agency (APEX) the International Leather Forum was held on January 20th at the Couromoda fairgrounds in Sau Paulo Brazil

L to R Don Ohsman, Miguel Galperin, Wolgang Goerlich,
Paul Pearson, Gustavo Quijano, MIchael Duck

The panel consisted of:

• Wolfgang Goerlich is President of the CICB – Brazil
• Donald Ohsman – President, Hidenet.com - US
• Paul Pearson – Secretary of the International Tanners Council (ICT) - UK
• Miguel Galperin – Director Industrial Operations &Sourcing of SADESA _ Argentina
• Gustavo Quijano – Executive Director of the Confederation of European Union Tanneries
• Michael Duck - Senior Vice President UBM Asia Ltd. and Director of APLF - Hong Kong and ACLE – Shanghai

After Mr. Goerlich’s introduction Don Ohsman gave a summary of what had happened to the international hide market during and after the collapse of prices began in September 2008.

Contracts were broken as hides arrived at their destination three months later with prices around $30.00 after they had been purchased at $65.00 - $70.00 Upon delivery, buyers were asking for discounts to compensate for the fall in price and too many containers just sat in ports.

However, in May 2009 many tanneries were obliged to restock if they wanted to continue operations as inventories had fallen in anticipation of lack in demand and as tannery operations were wound down.

 
Don OhsmanDowJones Index

Mr. Ohsman presented a chart of the Dow Jones Index which coincided with the collapse and recovery of the hide market.

Restocking forced the hide market to bottom out and prices started to rise in May/June 2009. Mr. Ohsman noted that slaughter in the US had declined by 5% in 2009 and could decline by a similar percentage in 2010.

He noted that if hide prices rise as slaughter falls in both the US and Brazil, this could open the door for an increase in synthetics usage. He anticipates an economic recovery in 2010 and demand for finished goods should increase as the recovery sparks what he termed a “trickle down effect”: Based on these factors he anticipates that hide prices could vary by +/- 10% during 2010.

China goes to WTO on footwear duties

China filed a complaint against European Union shoe tariffs at the World Trade Organization as Beijing continued its legal assault on what it says is unfair Western protectionism. Europe has grown increasingly concerned about China's balance of trade and what some critics view as its artificially weak currency.

China, which joined the W.T.O. in 2001, filed its first unfair trade case against the European Union in July 2009, also involving antidumping duties.

The latest move appeared intended to increase pressure on the European Union, which had itself been sharply divided over extending the shoe tariffs.

In a statement issued by its mission in Geneva, where the WTO is based, the Chinese government said Europe's actions "violated various obligations under the W.T.O and consequently caused damage to the legitimate rights and interests of Chinese exporters." It added that China "had repeatedly consulted" with the European Union but said that its concerns "had not been properly addressed or settled."

In an eight-page legal complaint, the Chinese government requested consultations on both the original 2006 decision to impose the shoe duties and last year's move to extend them. The EU and the U.S. have sought to stem the flow of Chinese imports with special duties.

In the EU case, China is taking on one of the most important tariff increases ever levied, which has negatively impacted its shoe industry. The 16.5% tariffs are antidumping duties, meant to punish goods that are sold below cost and hurt the sales of domestic producers. The EU duties were inaugurated in 2006 and extended for 15 months in December 2009. At the same time, shoe imports from Vietnam were hit with a 10% tariff.

The duties "violate WTO rules and undermine the legitimate rights and interests of Chinese businesses," Commerce Ministry spokesman Yao Jian said, according to the Wall Street Journal.

The EU dismissed the complaint. "Antidumping duties are not about protectionism," said spokesman John Clancy. "They are about fighting unfair trade." The measures, he said, were imposed only on "evidence that dumping of Chinese products has taken place and that this is harming the otherwise competitive EU industry."

Timberland earnings jump

Timberland reported fourth-quarter earnings vaulted 69.4% to $22.3 million, up from $13.1 million, ayear ago. Revenue eased 0.7% to $387.8 million from $390.6 million a year ago and were down 3.9% on a constant dollar basis, reflecting declines in the boots business partially offset by strong growth in the SmartWool brand and performance footwear.

Global footwear revenue decreased 2.8% to $273.4 million from the fourth quarter of 2008, as declines in the boots business in North America and Asia offset growth in the European boots business. Apparel and accessories revenue increased 2.9% to $106.8 million compared to the prior year period, due to solid growth in the SmartWool apparel and accessories businesses.

Worldwide consumer direct revenue increased 3.7% to $138.2 million from the fourth quarter of 2008, driven by an improvement in apparel and casual footwear, partially offset by a decline in boots. Global wholesale revenue was down 3.0% to $249.5 million compared to the prior year period, primarily due to a decline in the kids' boots business and Timberland® apparel.

Baker’s Footwear

Bakers Footwear said net sales in January were unchanged at $11.9 million compared to the same period last year. Comparable store sales increased 0.8%, compared to an increase of 4.2% for the four-week period ended January 31, 2009.

For the fifty-two weeks ended January 30, 2010, the company's fiscal year 2009, net sales were $185.4 million, an increase of 0.9% from $183.7 million in the fifty-two weeks ended January 31, 2009. Comparable store sales for fiscal year 2009 increased 1.3%, compared to a comparable store sales increase of 0.5% for fiscal year 2008. Details are available in Hidenet’s This Week in Leather

Mexican health certificates

USHLA advised members that they have just received information that the Mexican and US authorities are still discussing the animal health certificate for hides. As a result of inconclusive negotiations, the Mexican proposed regulations did not go into affect on February 1. The date of any new regulations has been postponed until March 31. For the time being, the 16-4 is still effective for shipment of hides to Mexico.

Wolverine sales down

Wolverine World Wide, Inc. reported fourth quarter revenues declined 9.7% to $312.5 million. Net earnings fell 31% to $16.7 million, compared to $24.1 million, a year earlier. Details are available in today’s issue of This Week in Leather

Hermes sales bounce higher 

Hermes scored an 8.5% increase in 2009 turnover, making it one of the few European luxury houses to grow sales in the year just finished. Hermes announced Friday that 2009 turnover had risen to 1.914 billion euros, or $2.625 billion, thanks to solid retail growth throughout the year.

Hermes only provided sales figures in its release, but predicted that its net income “should be slightly up compared with 2008,” when complete financial results will be reported on 25 March 2010.

Hermes added that “growth accelerated in the fourth quarter,” especially at the Christmas holidays, when robust trading drove up sales in the Group's stores up by 18 %. In the most recent three-month period, sales expanded by a robust 20 percent in the Americas, by 12% in Asia and by 9% in Europe.

Tandy leather reports increased sales

Tandy Leather Factory Inc. reported sales for the month of January were $4.5 million, up 3% compared with January 2009.  Retail Leathercraft’s sales rose 8% to $2.3 million compared with January 2009 sales of $2.1 million and the 74 comparable stores’ sales were up 7% for the month compared with the same period last year.

Tyson posts profit

The industry’s largest beef processor in terms of sales, reported profits in its Oct-Dec quarter. As reported by CBW, profits in its other segments were also far stronger than expected, as were overall results. Tyson Beef had operating income of $119M in the quarter. This amounted to about $64 per head or 4.4% of sales. The results were almost identical with the previous quarter and were vastly better than a year earlier when Tyson Beef only broke even. Tyson says it expects a 1% reduction in cattle supplies in fiscal 2010. But it does not expect a significant change in the fundamentals of its beef business as it relates to the previous few quarters. It expects adequate supplies to operate its plants

EXPORTS

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Raw hides higher

Export sales of raw hides for the period ending January 28th totaled 552,200 pieces. This was up 31% from last week. Destinations were:

China	302,900
Korea	92,800
Taiwan	66,600
Thailand	24,200
Mexico	13,400
Hong Kong	13,100	+2,700 kip
Japan	11,800
Vietnam	8,900
Italy	6,500	4,100 kip
Germany	4,000
Spain	1,200
Sweden	600

Export shipments against previous sales were 430,500. This was up 7% from last week. Outstanding sales totaled 3,940,100 raw hides. This is up from last weeks 3,821,500 and the week before when it was 3,820,900 raw hides.

Wet blue hide sales jump

Net sales of wet blue hides for the period were 186,900 pieces. This was 72% over last week. Destinations were:

China	85,600
Korea	41,600
Mexico	17,400
Vietnam	14,800
Hong Kong	14,400
Taiwan	8,100
Germany	5,900

Shipments against sales for the week were 145,200 and outstanding sales on the 28th were 654,600 wet blue hides. This compares to 612,900 last week and 634,700 two weeks ago.

Combined raw and wet blue outstanding up 3.6%

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The combined raw and wet blue sales still to be shipped totaled 4,594,700 pieces. This is up from 4,434,400 last week and 4,455,600 two weeks ago.

Export sales/slaughter/shipments 2009

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Year to date export sales/slaughter/shipments

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Total raw and wet blue export sales for the period were 739,100.  Combined shipments were 575,500. Slaughter doing the period approximated 625,00 head.

For the first time this year, and even in late 2009, the combined raw and wet blue export sales were larger than FIS. However, shipments against previous sales were not.

Wet blue splits

Net sales of wet blue splits for the week ending January 28th were 626,800 lbs. 658,000 lbs. went to China and 80,200lbs. to Hong Kong. A cancellation/adjustment was seen from Korea at 105,500 lbs.

Weekly export shipments were 661,900 lbs. leaving an outstanding still to be shipped total of 7,608,100 lbs. This compares to 7,640,000 lbs. last week and 6,487,700 lbs. the week before that.

FORECAST

How did we do?

As we predicted in our last edition, prices on about all selections remained fairly steady this week. We did not expect to see any gains in steers nor the cow sector and we were right on target. We also said that we felt were at the top of the recent trading range and this was correct as well.

And for the coming week?

We think that producers will do well to maintain current levels in the coming week, and declines in steers would not surprise us. Specifically, this would mean $0.50/pc lower on steers but we would not be surprised by $1.00 either. We can say with a degree of confidence that we are not about to see any increases in the coming five trading days.

In cows, we expect prices to stay steady, but if there were any increase in supply, which we do not expect, prices could go somewhat lower.

While Lunar New Years holidays won’t officially start until next Friday, most firms in the Far East are busy with arrangements for their long shutdown (in China especially) and are typically putting buying plans on hold for at least the next several weeks.

As a result, in order to move any volume, our sense is that producers will have to lower prices to tempt buyers, but we do not expect to see this happen in any significant number.

TALE OF THE SCALE

We have to call the balance of supply and demand roughly even today, but we sense that by next Friday, it could start to tip to the left due to Lunar New Years closings.

12.25.09

1.1.10

1.8.10

1.15.10

1.22.10

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

FRIDAY AFTERNOON FACTOR

One thing that causes the FACTOR to have a little bearish bias today is that with the exception of some cows along with low grades and bulls, a number of producers, will, at a price, still make sales this afternoon.

The lid on prices

As often mentioned in these pages, retail price points still dictate what leather products can be priced at. As hide prices have risen since last fall, leather prices have not kept pace. As one major Chinese tanner said in a conversation this week, shoe upper leather buyers have increased their price by about 10 cts/sq ft from the low’s of last year which make it impossible for a tanner to operate, even with averaging the cost of lower priced hides bought months ago.

In an email conversation with one of the worlds largest brands this week, it was confirmed that the most prominent shoe upper leather prices have been set for months for the first half of 2010 and are in the process of being concluded for the second half of the year. By the same token, he noted that the wholesale price to retailers has also been set for months and can’t be changed.

So yes, as we reported last week, the economies (in most places) are off their lows of 2009, but there is a point where leather prices cannot be increased based on retail pricing and apparently, we have now reached that level.

Stories continue to flow in from hide producers and traders visiting their Asian customers with reports of low inventories on the part of tanners. Therefore the need to buy certainly exists, but tanners would rather, and will, delay production, or find lower priced alternatives before they will operate at significant losses against their previous leather sales.

PLEASE NOTE: Instatrade is now available on a subscription basis. Receive reports of actual sales as they happen. To subscribe, or register for a free trial, just go to http://www.hidenet.com/login.asp?it=yes

SLAUGHTER

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Federally inspected slaughter for the week ending Saturday February 6th is estimated to be 642,000 head. Last week’s total was 629,000 and for the same period last year, 625,000. Year to date slaughter is currently on par with last year at this time.

PRICE GUIDE SELECTION WEIGHT PER PC FOB LAST WEEK LAST YEAR Heavy Texas Steers 64-66 $66.00-67.00 $67.00-68.00 $38.00-39.00 Branded Steers 64-66 $66.00-67.00 $66.00-67.00 $35.00-36.00 Colorado Steers 64-66 $63.00-64.00 $62.00-63.00 $33.00-34.00 Butt Branded Steers 64-66 $66.00-67.00 $66.00-67.00 $37.00-38.00 Heavy Native Steers 64-66 $67.00-68.00 $67.00-68.00 $38.00-39.00 Heavy Native Heifers 50-52 $58.00-60.00 $58.00-60.00 n $30.00-31.00 Branded Heifers 50-52 $56.00-58.00 $56.00-58.00 n $27.00-28.00 Heavy Native Cows 50-52 $46.00-48.00 $48.00-50.00 $48.00-50.00 Branded Cows 50-52 $40.00-42.00 $40.00-42.00 $40.00-42.00 Spready Dairy Cows 50-52 $54.00-56.00 $55.00-58.00 $23.00-24.00 Over-weight Kip 25-35 $55.00-57.00 $55.00-57.00 $55.00-57.00 Native Bulls 100-110 $52.00-53.00 $52.00-53.00 $22.00-23.00