CHICAGO When National Football League teams
take the field, Skip Horween feels a sense of pride: the
leather for the footballs being kicked, passed, carried -- and
sometimes fumbled -- comes from his Chicago factory.
But that pride now carries a price. The cowhides he buys
and turns into leather are costing a lot more these days.
Demand for leather is growing around the world, and leather
makers in China, South Korea, and elsewhere are buying huge
numbers of U.S. hides. That has driven up prices and reduced
supplies -- good news for the U.S. beef industry, but not so
good for domestic leather companies.
"It hurts us," Horween said in an interview at the Horween
Leather Company factory on the north side of Chicago.
Each week semi trucks bring pallets of cowhides to the
factory, where Horween's 130-member staff removes the hair and
uses dyes, oils, and machines to turn them into soft leather.
In addition to NFL footballs, Horween leather is used to
make shoes, baseball gloves, clothes, and wallets. To cope with
higher hide prices, the company has been developing new
products "that can be processed more efficiently," Horween
Horween has tried to pass the higher costs on to his
customers, but that is not always possible as he competes with
lower-priced foreign leather producers.
In 2001, Horween took over the family's leather business,
which was founded by his grandfather in 1905.
In the past year he has seen hide prices go from $70 apiece
to $80. The company uses 2,500 hides a week, which works out to
additional costs of $25,000 a week.
Hides have become a good source of income for beef-packing
companies which slaughter and process cattle.
"There is a relatively small number of players who control
the bulk of that market and they exercise tremendous market
power," Horween said. "The hide has come to be considered a
more valuable byproduct."
HIDES ARE BIG BUSINESS
While the overseas demand for hides has pinched domestic
leather companies, it has been a minor boon for the struggling
beef industry which has operated on thin margins and coped with
slow beef exports in recent years.
"It adds $70 to $80 to the value per head (of cattle),"
said John Reddington, president of the U.S. Hide, Skin and
Leather Association, a unit of the American Meat Institute in
Amid strong global economies, a cheap U.S. dollar, and a
preference for U.S. cowhides, industry leaders predict exports
in 2007 will exceed the $1.6 billion shipped in 2006.
"We are anticipating it is going to be up about 20 percent
in 2007, based on information in the first three months of the
year," Reddington said.
Part of this demand is due to global growth in the middle
class which is buying leather goods, whether it be clothes,
shoes, or cars with leather seats.
"The worldwide demand for leather is surging," said Jim
Robb, an economist with the Colorado-based Livestock Marketing
Information Center. "The dollar has been rather weak and that
tends to stimulate exports too."
MAD COW HITS BEEF, NOT HIDES
The demand for hides has been growing for some time, which
helped the U.S. beef industry survive mad cow disease. When the
United States reported its first mad cow case in late 2003,
overseas buyers quickly banned U.S. beef.
"In many cases the reaction has been to ban everything
related to that species. They never banned the hides," said
While most of the U.S. hides go overseas, much of the
leather comes back in the form of shoes, clothes, handbags and
Australia and Brazil also export cowhides, but Reddington
said U.S. hides are preferred because they are generally free
of blemishes and insect damage.
"China is the No. 1 market for U.S. hides," he said. "U.S.
hides are probably the most expensive in the world because of
the higher quality."