When producers sell a beast in a saleyard or direct to processors, they are paid a price inclusive of the meat, offal and hide value.
With cattle prices expected to take a nine per cent tumble this financial year, according to Australian Bureau of Agricultural and Resource Economics and Sciences forecasts, following suit is the value of hides which are expected to take a tumble.
Australian Hide, Skin and Leather Exporters Association attributes the price fall of hides to social factors, including a move away from using leather products by major global brands due to targets by animal activist groups.
This is now being passed on to producers who are enduring a collapsed hide market, which have fallen 50pc in the past year, according to Meat & Livestock Australia’s recent co-products report.
Prior to the market plummet, the return for hides substituted processors’ killing costs of about $75 to $85 per beast.
What was previously a profitable part of processors’ businesses, is now forcing many to pay hide companies the cost of production for finished brine cured hide of about $10 a piece.
Adding to the trade pinch is the lack of tanneries in Australia, due to the cost and environmental issues.
China is now our biggest customer for hides and sheep skins, which created export income of more than $600 million last year.
However, hide prices have plummeted from their peak in 2016, which has heavily bruised processor incomes.
Prices for hides do vary greatly depending on weight, and condition.
Victoria is known for producing high quality hides, so returns are basically weight-driven.
Hides from Victorian cattle weighing 140-180 kilograms carcase weight average $11 each, while hides from cattle from 181-220kg fetch about $15 each.
The price increases incrementally for an estimated $5/50kg.
In the north, Queensland and Northern NSW processors are reporting they are letting tick-free hides go for as little as $7 a piece.
Despite falling 50pc year-on-year, prices for Victorian hides are higher than other states.
Suppressing the market is the growing activism about animal parts, with leather copping a hiding at a time when synthetics are seen as a cheaper, and potential reputation-saver for many brands.
Exacerbating the pressure has been high slaughter numbers in the United States and South America, pushing heavy supply onto the market.
Processors are taking this into account when purchasing beasts in an effort to pass this downturn in hide prices onto producers where possible.
With a large percentage of light cows weighing less than 180kg cwt, the majority of the hides hitting the market are unsaleable and possess no value.
Considering the factors hurting the demand, combined with the high supply of light hides, any reasonable recovery looks unlikely.
Adding to the grim outlook is a significant move by the few local tanneries left in Australia into kangaroo hides.
On a positive note, attendees of the recent Shanghai Leather Fair believed the hide market had finally found a floor and the only way was up.
