The US’ trade war with China and other countries is raising the cost of living and pressuring already weak wholesale hide and offal prices.
Just how far US cattle hide prices decline from here is anyone’s guess, but at some point, the by-product of cattle slaughter likely will find a market and probably build in value again, said a noted market analyst.
“It will be fascinating to see how this will play out,” said Nevil Speer, an industry consultant based in Bowling Green, KY. “I’d think South Korea would pick up the slack. Markets always move around and go to a different market.”
That doesn’t mean Speer thinks prices will come back to pre-trade war levels any time soon, but there should be a market at some level.
The hide and offal value as a whole has been declining unevenly for more than a year, and the USDA’s weekly average value has remained below last year and the 2012-2016 average all year.
Hide values provide the lion’s share of the total hide and offal value with mostly organ meat providing the rest. USDA data for monthly butt-branded steer hides showed average prices at $44.69 each in August, down from $44.87 in July and down from $51.42 a year earlier in August.
TOO SOON TO SHOW EFFECT OF LATEST TARIFFS
A 5% tariff on wet blue (partially treated) and raw hides going to China took effect on Monday. Smaller calf skins have a 25% tariff, all in retaliation to the US’ new tariffs on another $200 billion of Chinese goods, which also took effect on Monday.
Prior to the tariffs, the US exported 70% to 80% of its cattle hides to China, according to Foreign Agriculture Service data. Another big market is South Korea, which often tans the hides and sends them on to Chinese factories to be turned into leather goods, which than are exported back to the US.
The FAS said a variety of factors have contributed to declining demand for hides over the last year, including a shift in material use, tightening environmental policies and industry consolidation.
Tyson Foods, the US’ largest cattle slaughter firm, did not return calls for comment, but the Joplin, Mo., Globe reported that the escalating tiff between the US and China has hit local meat processor Cloud’s Meats in Carthage, Mo., hard. The story said his hides bring about $7.00 each, down from about $35 last year, and with a labor cost of $9 each to process the hides, he is losing money.
Speer said beef packers likely would eat the cost of moving hides along in order to maintain commerce continuity.
CATTLE, BEEF RECAP
No fed cattle sold Wednesday on the Livestock Exchange Video Auction, compared with 280 that traded four weeks previous at $109.50 per cwt.
Cash trading was reported last week at $110.50 to $111.50 per cwt on a live basis, down $0.50 to up $0.50 from the bulk of the previous week’s action. Dressed trade was reported at $170 to $175, down $2 to $4 from the bulk of the previous week’s trade.
The USDA choice cutout Monday was up $1.36 per cwt at $206.16, while select was up $0.68 at $195.39. The choice/select spread widened to $10.77 from $10.09 with 62 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday, was $157.34 per cwt, up $1.05. This compares with Monday’s Sep settlement of $156.45, down $0.50, and the Oct settlement of $156.30, down $1.77.