Hides and skins

Introduction

Projections of the supply of hides and skins and the demand for leather and leather products have been generated by means of a partial equilibrium model. Projections for the supply of hides and skins are linked to the projections of meat production provided by the World Food Model. The latter are converted into production of hides and skin on the basis of country-specific coefficients that reflect hides and skins collection rates. Demand for hides and skins, leather and leather products, expressed in raw equivalent, is assumed to depend on the world price of hides and skins, income and on past trends in consumption.

Production

In the medium term to 2010, global production of hides and skins is expected to continue growing at a slow rate. Slow or negative growth in production in developed countries is expected to be upended by faster growth in developing countries where breeding herds are likely to expand in order to satisfy domestic demand for meat.

Among the developed countries, production of bovine hides and sheep and goat skins in North America is expected to contract, while in Europe and the former Soviet Union area the negative trend experienced during the past decade is likely to reverse mainly due to improvements in income that are projected to take place in Eastern European countries and the Russian Federation and the subsequent increase in the demand for meat and slaughter.

Production of bovine hides and sheep and goat skins in developing countries is projected to increase, amounting to 56 and 71 percent of the corresponding global production levels in 2010. This increasing trend is likely to be governed by growth in slaughter and the per capita consumption of meat, as well as by increased efficiency in the collection, flaying and preservation of hides and skins, as in Africa.

Bovine hide production in Latin America, the largest producing region, is likely to grow at a slow rate to approximately 1.44 million tonnes by 2010. In the Far East and especially China, production of bovine hides and sheep and goat skins is expected to grow at 1.83 and 1.80 percent respectively, rates slower than those of the past decade, as the demand for meat levels off. In Africa, the production of bovine hides is likely to grow at 1.81 percent per annum, a rate higher than that of sheep and goat skins, due to a strong trend in the consumption of beef. In the Near East, production of sheep and goat skins is expected to grow at relatively fast rates since countries in this region are likely to rebuild the breeding flocks after the drought period of 2000 in order to meet growth in demand for the traditionally consumed mutton.

Consumption

More than 50 percent of bovine hides and approximately 40 percent of sheep and goat skins is processed into footware, while the remaining is used for the production of garments, furniture and travel goods. It is projected that in the medium term leather shoes will continue being the major leather product consumed, although other products are also expected to increase their share especially in the developed countries. While the consumption of leather products is mainly determined by the level of prices, income and consumer preferences for other product attributes, the production of hides and skins depends on factors related to the meat market that are exogenous to the hides and skins and leather markets. These differences in economic incentives at both ends of the leather supply chain are often responsible for wide price variations as the market adjusts to equilibrium. In the medium term, it is likely that income growth will stimulate demand for footware and other leather products, and as the supply of hides and skins will record restrained growth rates, prices will strengthen to bring consumption in line with production.

In the medium term, consumption of leather products, expressed in raw equivalent, in the developing countries is expected to increase by an average of 1.1 percent per annum for bovine hides and by 1.8 percent per annum for sheep and goat skins. These rates reflect a slowdown in consumption in the developing counties compared to the previous decade that was characterized by a strong upward trend in the Far East, especially in China where improvements in income in conjunction with increased tanning capacity and gains in efficiency in the manufacturing of footware stimulated demand. It is expected that consumption in China will decelerate because the possibilities for further efficiency gains may be exhausted and the income propensity to consume leather goods is likely to diminish. Consumption of hides and skins in Africa is expected to increase by 1.54 and 4.67 percent per annum respectively, mainly due to improvements in income, while consumption is likely to increase more slowly in the Near East. Consumption is expected to contract slightly in Latin America.

In the developed countries, consumption is projected to increase at a slow rate as relatively slow or negative growth in North America, Europe, Oceania and Japan is likely to be offset by rapidly growing consumption in countries in the former Soviet Union area that will experience fast income growth.

Trade

Among the developing regions, the Far East is expected to continue being the most important net importer of bovine hides with imports projected to grow by 1.24 percent per annum to approximately 1.0 million tonnes by 2010. It is likely that given the tanning and footware manufacturing capacity in China, most of the imports in the Far East will be in the form of raw hides for processing and re-export to other developing countries. Exports of bovine hides from Africa are likely to grow at a fast rate and provide an important source of export earnings for countries such as Kenya, Ethiopia, Somalia and Zimbabwe, while exports of sheep and goat skins are likely to be reduced due to a growing domestic demand. Latin America is expected to continue being the most important net exporter of bovine skins and leather products accounting for 10 percent of global consumption by 2010.

Developed regions are expected to remain, as a group, net exporters of hides and skins. Exports of bovine hides from North America are likely to grow at a fast rate, while those from countries in the former Soviet Union are expected to contract due to strong domestic demand. Oceania will remain the dominant exporter of sheep and goat skins, while net imports of both bovine hides and sheep and goat skins into Europe are projected to level off by 2010 to 47 000 tonnes and 59 000 tonnes respectively, exhibiting slow rates of growth.

Issues and uncertainties

Although hides and skins output from developing countries is projected to increase appreciably vis-à-vis developed countries, a number of problems that have plagued the sector in many of those countries need to be addressed in order to enable them to realize their full potential. Such problems include but are not limited to poor quality of hides and skins; poor and deteriorating infrastructure of roads, weak power supply and telecommunication that affect all the components of the supply chain; inadequate levels of technological development; low labour productivity, poor management, and inefficient training services. Fortunately, many stakeholders realize the need to address these issues through a number of initiatives undertaken in that regard

On the other hand, the leather industry has been and continues to be under increasing pressure from different fronts concerning compliance with environmental regulations. By its very nature, the leather processing requires enormous amounts of water and involves the use of several chemicals in varying amounts. The effluent discharged from tanneries thereby becomes a significant source of environmental pollution.

Many in the industry continue to search for alternative resource management that would enable the tanning industry to modify its processing methods to ensure a sustainable manufacturing industry for the future. A number of such "environmentally friendly" processes have been developed and implemented in many tanneries across the world, but mostly in developed countries. By virtue of their scale of operation, many tanneries in the developing world still lack the capital required to invest in the currently available environmentally friendly processing methods. The increasing costs of environmental compliance are making it difficult for processors to remain competitive. In some cases, this has led to closures, while in others, tanneries have chosen to relocate their businesses to places where environmental regulations are less stringent. In the medium- to long-term, compliance with environmental requirements could continue to lead to a shift in tanneries from developed to developing countries where regulations are still less stringent and labour costs are lower.

Table 2.81. Bovine hides: production, actual and projected

Table 2.82. Bovine hides: consumption, actual and projected

Table 2.83. Bovine hides: net trade, actual and projected