There is a high supply of large hides out of the US in line with elevated levels of production.
The hide market has fallen further as decreased demand, the increase of synthetic leather, and environmental regulations have an impact.
The hide market has continued to struggle in 2019, with June prices declining 50-90% year-on-year.
This has been an ongoing trend, with prices per hide collapsing since the highs of 2014.
The total export value of Australian hides in 2018 was $330 million (IHS Markit), down 17% from 2017 and 19% from 2016.
A number of the factors that are having a major impact are:
- Increased substitution for leather with synthetics in footwear and accessories – mostly driven by cost and availability.
- Increased environmental regulation in China (the world’s biggest hide market and destination for over 80% of Australia’s supply) impacting their capacity to process hides, while also driving up their overheads.
- Increasing labor costs in China being passed onto processors/hide traders.
- High supply of large hides out of the US in line with elevated levels of production.
- US hides typically carry a higher value, as a result of the extensive feedlot production system.
Monthly prices in June decreased for all categories, between 10% and 20% on the month prior. The best large hides (from cattle over 350kg cwt) in Victoria are averaging just over $20/hide, while the same category in NSW are averaging $17/hide and in Queensland just under $10/hide. Nearly all hides from cattle under 350kg cwt are making less than $10/hide, with many small or poor condition hides reportedly holding no market value.
In the short term, prices could continue to come under pressure as the aforementioned trends appear set to continue. However, if the season turns around, we may see supplies tighten as well as an underlying improvement in quality, potentially lending support to prices.
https://www.mla.com.au/prices-markets/market-news/hide-prices-reflect-oversupply/