Leather goods may soon become very expensive

Plagues in Europe boost cowhide price


The price of U.S. cowhide is soaring and the cost of finished leather will soon follow, the first major repercussions in America from Europe's twin plagues of foot-and-mouth and "mad cow" disease.

American shoppers could end up paying as much as $1.5 billion more for leather goods over the next year, a Commerce Department economist said.

The increases should be small on items such as purses and wallets, but products requiring more material, such as leather furniture and car seats, could rise in price by hundreds of dollars.

"Business people are taking this very seriously," said Jack Morgan, a spokesman for the American Apparel and Footwear Association.

"If the prices go up, there's a good likelihood the consumer will look for something else, either artificial or textile," Morgan said. "Consumers have come to expect deals and specials and extremely competitive prices."

American hides are being bid up by desperate European manufacturers, which have run short on their own leather supply as millions of animals there are killed and burned.

The detection of foot-and-mouth disease in Argentina, another major exporter of hides, has squeezed the market further.

And if the shortage of healthy animals continues, price boosts are likely on a number of other nonleather items, because animal byproducts are used in the manufacture of lipstick, shampoo, cheese, candy and vitamins, among other products.

U.S. tanners are paying as much as 25 percent more for hides. Shoemakers have warned Wall Street about price increases or a potential hit to corporate profits. And retailers are bemoaning yet another blow to already weak consumer spending.

"I've been in the business for 42 years, and I've never seen a supply shortage or anything even close to this," said Ken Purdy, president of Prime Tanning Co. of New Hampshire, one of the nation's largest leather suppliers. "Somebody in the next six months' time has to absorb these price increases. When most manufacturers ... price their new lines, any cost increase will be in there; you can bet on that."

In Britain alone, more than 2 million animals have been destroyed in efforts to halt transmission of foot-and-mouth disease. But that's only part of the reason for the shortage of animal hides.

Mad cow disease, or bovine spongiform encephalopathy, bears the brunt of the blame. Although the disease has not led to widespread controlled kills, it has spawned a public relations nightmare for the European beef industry.

Unlike foot-and-mouth, which people do not easily contract, mad cow can be fatal in its human form, a variant of Creutzfeldt-Jakob disease. Fear of the rare disease has whittled away at the demand for red meat in Europe for a decade, cutting beef consumption by half in that time.

And because the only economical way to harvest hides is by using special machines at the slaughterhouse, the reduction in beef consumption has served to reduce leather supplies.

The result, tanners say, is about 200,000 fewer hides available each week.

U.S. tanners shipped 23 percent more rawhide overseas in January and February than in the like period last year, the government reported.

So far, American consumers mostly have been shielded from the price increases because retailers usually have fairly long contracts and are still paying pre-shortage prices. Bigger tanneries, meanwhile, are hoping to get by on older inventory until prices begin to recede.

Hides in storage, however, last only so long, Prime Tanning's Purdy said. By fall, even the largest tanneries are likely to need more hides, he said, and few believe that the European crisis will have eased much by then.

Many companies are feeling the pinch:

Shoemakers Nike Inc. and Timberland Co. warned Wall Street in their Securities and Exchange Commission filings that the European epidemics could threaten their earnings for the new fiscal year.

Sporting goods makers say apparel, baseball mitts, basketballs, footballs - which are calf leather rather than pigskin - and many other pieces of equipment could rise in price.

Irving Tanning Co. at the end of March pointed to skyrocketing domestic cowhide prices as the reason for seeking bankruptcy protection and initiating layoffs at its Hartland, Maine, operations.

Executives at Wilsons Leather Experts Inc. said they have enough hides to last through fall but could be forced to raise prices thereafter.

Car and furniture makers, which use huge amounts of leather, will be among the hardest hit.

"If we bring it down to shoes and wallets, it might be [a] ho-hummer," said Charlie Myers, president of the Leather Industries of America trade group. "But bring it up to leather sofas and leather trim in cars, then you're talking real bucks."

It takes about 3 square feet of leather to make a pair of men's shoes; outfitting a car's interior might require 230 square feet.

Demand for leather seats in compact cars - not even an option in some of those models a few years ago - has leaped 110 percent in the past two years, said Carolyn Picard, a supplier services senior manager at J. D. Power & Associates' Troy, Mich., office.

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