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COMMITTEE ON COMMODITY PROBLEMS |
INTERGOVERNMENTAL GROUP ON MEAT |
SUB-GROUP ON HIDES AND SKINS |
Sixth Session |
Cape Town, South Africa, 9-11 November 1998 |
CURRENT SITUATION |
1. Markets for both hides and skins have been seriously affected by weaker demand for leather and leather manufactures induced by the poor economic performance of many economies, and prices in 1998 receded from their 1997 levels. Demand remained sound only for high quality material. Production stagnated in 1998 and no major increases are foreseen for 1999. Export earnings contracted in 1997 and further in 1998, reflecting mainly weaker prices.
2. International prices of bovine hides and skins declined towards the end of 1997 and weakened significantly in the third quarter of 1998 reflecting a pronounced drop in demand for raw hides in the leather industry. The average hide price in the first 10 months of 1998 was about 10 percent below that of 1997. Sheepskin prices, which had declined since in the second part of 1996, continued to weaken in 1997 and collapsed in October 1998 (see figure), the result of reduced import demand in the Russian Federation and in the leather garment sector of the main importing countries.
3. The growth of global production of bovine hides and skins appears to have levelled off in 1998 at around 5.6 million tonnes, following an increase of 2.1 percent in 1997. Aggregate output in both developing and developed regions would remain relatively unchanged from the previous year. Among developing countries, China is now among the five largest hide producing countries in the world and is expected to remain the leading producer among developing countries. In 1998 its production expanded by an estimated 5.7 percent, to almost 520 000 tonnes. China's herd grew from 123 million head (8.3 percent of the world total) in 1996 to about 147 million head (9.8 percent of the world total) in 1998. Higher output is also expected in India in 1998, where production would grow by 3 percent to 370 000 tonnes. In Africa, output is set to rise in Egypt, South Africa and Nigeria while little change is expected in eastern African countries where some cattle losses were reported due to flooding. In Latin America, production is expected to increase in Paraguay and Colombia as result of continued improvement in the livestock management practices. By contrast a contraction is expected in Argentina as cattle are being withheld from slaughtering for herd rebuilding. Reduced bovine hide output is also expected in Brazil in 1998 and 1999 due to lower slaughtering as a result of weak demand for beef.
4. In the United States, the largest producer of bovine hides, production is expected to decline from 962 000 tonnes in 1997 to 875 000 tonnes in 1998 due to the ongoing contraction of cattle inventories. The United States' herd, which reached 103 million head in 1996, started declining in 1997 and a further contraction is expected in 1998. A decline in output is likely to be recorded in the Russian Federation and in eastern European countries, reflecting continued contraction in breeding herds. Production in the European Community remained fairly stable in 1998 while some expansion is expected in Oceania in the wake of droughts which have boosted slaughtering and hence hide production.
5. World production of both sheep and goat skins are estimated to have increased slightly in 1998, due largely to a 9 percent increase in slaughter from expanded flocks in China which offset reductions in eastern Europe and area of the former USSR. The number of sheep and goats in China, which has the largest flock in the world, grew from about 277 million in 1996 to 304 million in 1997 and could reach 335 million in 1998. Output is also expected to contract in the United States and New Zealand in 1998 due to lower slaughtering from reduced inventories. By contrast, output of sheepskins is estimated to have increased in Australia and European Community reflecting higher slaughtering from expanded flocks.
6. Global exports of bovine hides declined by almost 3 percent in 1997. Shipments from most major producing and exporting countries appear to have declined in 1997. Exports of bovine hides and skins from the leading exporter, the United States, fell by over 4 percent to 685 000 tonnes as a result of weaker import demand from Asian countries. Demand by Asian processing countries is likely to remain weak in 1998 and 1999 because the financial crisis has curtailed their capacity to purchase raw material for their tanning industries. Sales from the area of the former USSR declined to 235 000 tonnes in 1997 and a further reduction is anticipated in 1998. Exports from Australia expanded in 1997, sustained by increased output, while shipments increased from Brazil due reduced domestic demand.
7. During the past two decades global trade has increased at a faster rate than production, as an increasing proportion of hides and skins has been exported rather than tanned in the country of production. Trade growth has been reflected in increased net exports from the developed to the developing countries, as some developed countries reduced their tanning activities, while processing capacity in developing countries, particularly in Asia, has expanded. However the weaker prospects for demand in many world economies are expected to slow down this expansion in tanning capacity in developing countries in 1998 and 1999.
8. Imports of bovine hides and skins by Italy, the world's largest market, declined by about 4.6 percent in 1997 to 494 000 tonnes, due to a contraction in leather footwear production. This country's imports remained at about the same level in 1998. China retained its position as the world's second largest importer of bovine hides, and its requirement for 1998 is expected to remain at the estimated level of 1997 (almost 380 000 tonnes). The Republic of Korea's import requirements declined from 341 000 tonnes in 1996 to 332 000 tonnes in 1997, in line with reduced tanning activities. Short term prospects are not favourable, and Korean imports of raw hides are likely to decline further in 1998 as the impact of weak domestic demand is exacerbated by the financial crisis in Russia, the largest buyer of Korean leather products.
9. The volume of trade in sheep skins expanded by about 3 percent in 1997. The world sheepskin market is more fragmented than the bovine hide trade, with the largest exporters each accounting for no more than 15 percent of total trade. Of the major exporters, shipments from New Zealand remained stable, while Australia's expanded by 4 percent and those of the Islamic Republic of Iran by about 10 percent. Apparently little further increase took place in global trade in 1998, as the increase in production this year was concentrated in China, a country which processes most of its own sheepskins.
10. World exports of goatskins in 1997 remained around the levels of 1996, and no major changes are expected for 1998.
11. In 1997, earnings from the export of bovine hides appear to have declined by almost 4 percent from the 1996 record level reflecting a fall in the volume of trade coupled with a decline in prices. Some further reduction is expected in 1998 and 1999 under the influence of the global economic slowdown. About 11 percent of the global receipts from aggregated raw hide and skins exports, or some US$566 million, accrued to developing countries in 1997, in a market dominated by developed countries. Their share of global earnings from raw hide and skins exports, appear to have changed little in 1998.
12. Developing countries, as a group, gain a much higher share of the global earnings for processed and manufactured leather than they do for raw hides. To an increasing extent, developing countries import raw hides and skins from developed countries for processing, manufacturing and re-export as value-added products to the developed countries.
13. Between 1994 and 1996, developing countries' exports of leather footwear, averaged US$11 000 million annually, almost 43 percent of the global value. Markets in the Far East such as China, Hong Kong and the Republic of Korea dominate this trade, with Thailand and Indonesia rapidly increasing their earnings. Among other developing countries, Brazil has also become a major exporter of footwear and other leather items.
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