Pelt Market Seeing Improvement;
Challenge Now To Clean Up Keds

By Colleen Schreiber

DENVER — "I don’t have great news, but it's a whole lot better than the wool business."

That was the message delivered by pelt company representative Richard Grossman to sheep producers at the recent American Sheep Industry Association annual meeting here.

"The skin market is coming back because the Turks are back," Grossman said. "It was the collapse of the Russian economy and that market that put us in the pickle we’re in," Grossman noted. "Today we’re selling most of what we produce, and routine credits are going back to livestock producers in a predictable pattern, but we're clawing our way out of a very deep pit and the amount of money going back is still very small."

The Henry S. Grossman Co., in business for 54 years, markets raw skins to custom tanners. Richard, himself, has been in the family business for 22 of those 54 years. Never in his memory, Grossman said, can he remember a once "hot" market reinventing itself a few years after a crash. But that, he noted, is exactly what has happened this time around.

"When the green market was hot; when the Spanish market was hot — when they collapsed, they didn’t come back. The Turks were the engine behind the high pelt market a few years ago," he reiterated, "and they're back and already they're setting the tone of our market."

Double-face skins, meaning leather on the outside and wool on the inside, has long been the big seller on the Turkish market. Those skins, in turn, are made into heavy coats and sold to Russia. It's been a critical market, Grossman pointed out, because Russians never have a warm winter.

"They’re expensive coats, and they're heavy, but that's what the Russians prefer. Russian women, in particular," Grossman said, "don’t mind wearing heavy coats, and our skins are among the heaviest. When there is European demand for double-faced skins, we normally see lighter pelts from skins like Spanish skins or English skins serving this market."

The double-face skin requirements include good leather quality and decent wool density. There are other premiums for white wool, he said. Animals that make good double-face skins are shearlings, spring lambs, and skins with wool anywhere from half an inch to three inches.

"They like the big skins, the kind that normally come out of our feedlots," he remarked. "We have a whole lot of 10-foot winter lamb pelts that could make wonderful double-face skins, even 70 percent of them, if we could just lick cockle," Grossman reiterated. "They'll tolerate a certain amount of discolored wool, and the wool density requirements are flexible. We don’t have to walk on water, but we do have to avoid the train wrecks."

How fast and how far the pelt market will come back, Grossman said, depends first and foremost on at what level the industry attacks the quality issue.

That quality issue, he noted, starts at the production level and is dependent upon the marketer's ability to distinguish between the better quality and average pelts.

"The double-face market two years ago was based on the idea that every skin with four legs was worth over $10, and a whole bunch were worth at least $15. The debacle of the last two years was that a whole lot of double-face skins that went into that market weren’t good enough to go into that market. In fact, a big percentage, maybe as much as 30 to 40 percent, were not good enough," Grossman told listeners.

"We knew what the Turks wanted for their money," he continued. "They wanted skins with good leather quality. They didn't want seedy skins, and they didn’t want cockily skins, which are the two main bugaboos in my end of the business.

"This is where the issue of quality comes into play, because if those same customers are back and we’re going to replay the scenario, we’ve got to do it right this time."

The quality issue on the production end, he stressed, really comes down to one thing — ked control. Keds, an external parasite, cause what the pelt industry refers to as cockle. Cockle defect, he said, looks like a terrible rash in which affected areas do not dye properly. Ked, Grossman pointed out, is strictly a winter problem, and the percentage of skins suffering from cockle defect varies from year to year. Seed scar and cockle are defects not visible to the naked eye, and that's why control of keds on the farm or ranch becomes particularly important.

"Your winter production has some of the largest skins in the American production cycle," he told ASI members, "and some of the whitest wools, all of which are very desirable for the double-face market. If we can clean up the ked problem, there are dollars per skin at stake," Grossman concluded.

The speaker told sheep producers that premium credits would be paid back to producers who work on the ked problem.

"If I have the knowledge that the stuff is clean and free of keds, believe me, I can get more money and I'll pay more money," Grossman assured listeners. "I pay more when I get more. I can’t get more when I have seedy pelts, and I can’t get more when I have cockle. In fact, if I get a lamb skin and it's crawling with keds, I am not going to send that skin to Turkey, and I will buy it accordingly."

Grossman added, however, that because ked problems are strictly a winter phenomenon, premiums won't be paid on every pelt 12 months out of the year.

The speaker also reminded listeners that there are multiple returns for the producer from ked control other than just higher pelt credits.

"Animals that don't have ked problems feed better, for example," he said.

The other area where producers can improve their returns is with cleaner animals.

"A few years ago the fashion was for dark colors, which meant that discolored wools could be colored," Grossman explained. "Today, lighter shades are in fashion. Therefore when we get a dirty lamb or we have one that won't make a very light tan, we basically can't send it to Turkey, or if we do it will go at a lower price."

The reason so many American skins are exported, Grossman told listeners, is because Americans are basically uninterested in the final product.

"The quality of the goods and the availability of the goods in department stores in the U.S. suggest what I know, and that is that the American consumer doesn’t have a real appetite for these goods. If the American tanner had strong domestic markets, we would have more domestic tanners," he insisted, "but we're just reshuffling the pack as to who the tanner is.

"The domestic tanners are not selling into this market; they’re selling into the same foreign markets that our tanners are selling the skins to abroad. It just depends at what stage the product goes abroad. Ultimately, the consumers are foreigners."

The puller skin market, which depends on the wool value, remains in a depressed state, which he attributed to the depressed wool industry.

"I used to be able to shear a three-inch skin with a machine and get $2 to $3 off the wool alone. I can remember a couple of years ago when I sold $300,000 worth of machine shorn wool. We haven’t had a sale in quite awhile," Grossman said. "Today we’re basically shearing only to make the skin more presentable to our customers, but we're not getting our shearing cost back from the value of the wool."

When asked about the value of hair sheep pelts, Grossman responded, "The only thing you’re going to get out of a hair sheep is a potentially better pickled skin. If the animal picks up any seed at all, you’re right at the bottom of the barrel with a seedy Dorper. You’ll be selling skins to Mexico for $1.75 to $2.

"Historically, the average skin credit is in the $7 to $9 range," he continued. "If you go to meat type animals, you're going to have to get that money back in meat yields, because you're not going to get it back on the skin. Essentially, if hair sheep become popular, the industry stands to lose a lot of money in coming years."

Many of the American skins that don’t make the double-face market go into paint rollers, medical pads, polishing pads, decorative items and the like. When asked about growing the domestic market and finding new outlets, in particular using leather in the automobile industry, Grossman cautioned listeners against moving in that direction.

"We have a very small supply of American skins, and roughly 40 to 60 percent of them are some of the best skins in the world. The one thing we don’t want is a big volume of cheap business, and that’s exactly what car seats amount to," Grossman said. "If you want to see how little you can get for your skins, let’s just see how many we can get into car seats. We’ll be competing with every synthetic in the book, we’ll be competing with the cheapest skins from abroad."

Grossman concluded by telling listeners that the skin credit will emerge in 2000 a whole lot better than in 1999, and it will be a progressive improvement.

"It would be ridiculous for me to suggest that we might have $10 to $15 skin credits anytime in the next two or three years," he added. "The market went so low, and we lost so many markets, really, by going too high, that it's unlikely we'll see big dollars anytime soon. I do think we will see $5 to $6 credits again, but not in the next year."

He reiterated his quality message to the industry and encouraged producers to clean up their ked problem.

"How fast we can come back has everything to do with getting the correct skins to the customers who are paying us top dollars," Grossman explained. "Our task, our challenge, is to see what percentage of our American skins we can get into these double-faced markets. The better job we do, the better the market will come back, and the faster it will come back."

The industry, he said, has asked for government funding to assist with research toward improving the value of pelts and also for finding new markets.