It is fairly common for self -serving pundits to predict what lies ahead on a plethora of subjects. Few if any, to my knowledge in the leather and hide business, publish such remarks. In addition, is one person’s guesstimate of what will occur in markets in the next 12 months any more valuable than anyone else’s?
While not offering any guarantee, we at Hidenet have had our normal success rate in 2016 in forecasting market directions. Our US week in review that predicts market movement each Friday (and then shows if we’re right or wrong the following week) had an annual success rate of 89%. Because of our track record of success, we feel qualified to present our predictions for the leather and Hide markets for 2017.
Based on reports received on a general increase of the use of leather in athleisure and a return, albeit in moderate degree’s, of more leather footwear sold in the past few months, we think this trend will continue in the coming year. This should push leather prices modestly higher, if not somewhat more.
If we are correct, then the odds are in favor of a price increase in the first quarter of 2017 - when the worst grains of the year are produced due to winter weather. We expect to see between a 5% and quite possibly 10% gains on steers in the period leading up to the APLF in late March. We think that the cow sector will remain firm and possibly gain a few percentage points based on Chinese furniture upholstery buying. We say this regardless of the current rate of U.S. Slaughter that cattle experts project to increase somewhat akin to this year’s 5%.
We fail to foresee any significant increase in low grade hides such as small packers, thirds, etc. There just isn’t enough demand for these selections, at least from the U.S. However, a general upturn in the market will carry these selections upward, but to a smaller degree.
As the year progresses, we foresee the seasonal decline in hide prices going into summer, but not to the degree of giving back the gains we expect in the first quarter. By late summer, just prior or during the ACLE Shanghai Fair, and into fall and winter, we project a recovery to the highs previously seen in the year.
We think that 2017 will see some increase from the current low prices of splits. We believe footwear, especially athleisure, will use more splits not only for cost, but for styling opportunities and more PU footwear going to the market place.
We expect to see, at least in the U.S. but possibly in other mature economies as well, that the current optimism for a better year has already created more housing sales and starter apartments both sold and rented by the younger generation. This means new furniture in the living room and a preponderance of leather due to its wonderful properties and an array of new styles and fashions.
Automotive remains a question mark in our mind. On a global basis, we are told that new units will not match the record number of the past two years. However, they do not predict a significant drop, but more or less an adjustment for various and sundry reasons such as one style (SUV/sedan/luxury/economy) becoming more popular than others.
It should be noted that by best estimates, upholstery, both furniture and automotive amount to less than 20-25% of all leather consumed on a worldwide basis. Therefore, the elephant in the room is footwear, upon which as noted, we are optimistic.
Towards this end, we saw a Wall Street Journal article recently that said in China more women than before are buying name brand designer footwear instead of all of the handbags they already possess. Retailers in China and elsewhere are therefore increasing their inventories, display space and promotion of more footwear, which at the USD200-USD800 range or more are all leather and selling well to the haves This is as not to be confused with the have-not’s who must buy synthetics strictly on price.
You can check back on this site in 12 months to see how we did, or make a comment with your projections which, we encourage. You can also see our week to week predictions on every issue of Hidenet’s US Weekly Market Report.
(*APLF thanks Mr Ohsman for this timely piece on the outlook for leather prices and demand for this year, 2017)
By: Don Ohsman – Publisher & CEO Hidenet