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Comment by matheweis | Hacker News Reader

“According to Hidenet, a leather markets research firm, a hide from a branded cow went for as little as $4 the week of July 15, down from as much as $81 just five years ago.”

Wait, what? Consumer trends have shifted so radically in 5 years that even with a white hot economy leather prices have dropped by 20x?

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Beef and hide are coupled goods. One cow produces about X kg of beef and Y m^2 of hide. If demand for beef is extra high, then it will depress the price of hide because the ratio in supply is roughly fixed between them.

There are other examples in modern society. Chlorine and caustic soda are produced in strictly fixed ratios from NaCl salt and electricity. Extra demand for one will depress the price of the other. The effect is quite sharp in this example, since both products are expensive to store.

Similarly, the hydraulic fracking industry has somewhat depressed the market price of natural gas in the US. The miners are really hunting for high-value liquid hydrocarbons. The gaseous hydrocarbons are quite low-margin by comparison, but come along for the ride in the shale being exploited right now. The effect is more modest in this example since new home construction, new electricity production, and industrial process heat can all be biased towards natural gas. But its still there.

If electric and other high-efficiency propulsion technologies takes off enough to impact gasoline consumption, then a side effect in the US will be an increase in natural gas prices. The source of the increase is twofold: Decreased production of liquid hydrocarbons will decrease supply of gaseous hydrocarbons, and increased demand for electricity will raise demand for gaseous hydrocarbons.

I can't help but get the sense that your economic materials analysis is based on a video game crafting economy. If the profitability of leather is low enough, then people will trash the raw hide but butcher and sell the beef. There's a lot of labor and logistics and materials that goes into producing the beef you cook or leather goods you buy beyond (cow) -> (meat,leather) -> (food,clothes). Remember, nobody knows how to make a pencil.

How does this contradict the point that GP made? GP did not imply that you get a free piece of leather with each cow slaughtered, just a hide.

Btw, even game economy models this part - in Dwarf Fortress a slaughtered animal produces skin, which will decompose if not tanned or converted to parchment.

They’ll trash the hides when the profitability of them reaches zero.

That still leaves a ton of room to over supply and depress prices.

Disposal costs money, too, so the "trash point" is actually at a somewhat _negative_ profitability.

> Similarly, the hydraulic fracking industry has somewhat depressed the market price of natural gas in the US. The miners are really hunting for high-value liquid hydrocarbons.

And so they have been fracking more liquidy "wetter" natural gas where possible, depressing prices for ethane, butane and propane (but which are still more profitable than methane, BTU for BTU).

Cheaper ethane = cheaper plastics as we turn on more and more polyethylene plants (easier to store/ship).

In the winter, we can froth up gasoline with butane, which is largely why winter gas is cheaper.

Why don't they just breed cows that are more spherical, to maximize the volume-to-surface-area ratio?

They're in the middle of that process.

https://www.beefmagazine.com/cow-calf/relationship-between-c...

"The amount of beef produced per cow has seen an 18% improvement over the past 20 years. The average cow size across all breeds is 1,390 lbs., with less than 100 lbs. separating the heaviest and lightest breeds."

Or more wrinkly. Increased surface area compared to a sphere. It works on brain surface area.

There's probably a tradeoff in the quality of the hide as a result of this however.

The goal is to get more beef and less leather.

I imagine most uses call for flat leather rather than curved.

So you want to breed cube-shaped cows?

If the sphere-cow is big enough, the surface will be practically flat...

A couple of points to keep in mind:

- After processing, leather doesn't rot. Thus it is a durable good, and stockpiles can build up

- Texas and other parts of the nation had massive droughts a few years back. This resulted in herd culling, which could have increased the supply of available hides at the time.

The economy is hardly white-hot, especially for people below the top decile or so – the median American worker made 5% LESS in 2018 than in 1979 (https://fas.org/sgp/crs/misc/R45090.pdf) – so I’d be surprised if this wasn’t basic economics: for a long time, leather was a premium good and cost more, so companies focused on using less of it and the large fraction of consumers who favor low prices rewarded them for it. It’s easy to hit a threshold where cutting the remaining usage entirely is a good marketing move since it removes a type of material from your system and attracts buyers who avoid animal products.

Prices may be low but they’d have to stay lower than the equivalent synthetics for a long time to get manufacturers to invest in redesigning and changing their supply chains.

It appears to me that the report you cite says that the overall median real wage rose by 6.1% over that time period. (Table 1, page 4, first row; related text on page 5).

What figure in the report are you using to determine a 5% decrease over that time period?

It almost certainly comes from this paragraph:

> In 1979, wages at the 10th percentile ranged from $10.03 for black and Hispanic women to $14.42 for white men, whereas in 2018 wages in the 10th percentile ranged from $9.72 for Hispanic women to $13.70 for white men.

This adds up to -4.99% for white men in the 10th percentile. Above the 10th percentile everyone has done better.

So the GGP mistook 'bottom decile' as 'top decile', then?

My mistake: that’s the figure for men overall, which is balanced in the general statistic by the huge gains for women. I should have checked more carefully but was on a phone.

The main point I was going at is that most of us here have a really skewed view of the general economy after a couple decades of good times for tech workers which haven’t been generally true of the overall job market, especially when you factor in benefits and job security. This is similar for stock market gains when so many Americans have no or only a token stake invested.

I assume cows are mostly raised and slaughtered for their meat, with leather as just a sort of bonus. That would mean that the supply is extremely inelastic: farmers won’t raise and slaughter noticeably fewer cows just because leather prices drop a lot, or more cows just because they jump a lot. That would imply that a small swing in demand could result in large changes in price.

I wonder how much of this is because of the increase in cheaper faux leather, maybe even also combined with inflation, you may be paying the same numerical amount for poly leather as you did for genuine leather 20 years ago.

Also I guess if a company can cut costs by using the improved poly leather and the consumer doesn’t notice or care then that’s the move.

More like cheap Chinese bonded leather which permeates most sub-$100 leather goods.

I make a pass on buying most leather products because it's so hard to find decent quality without an overinflated price. I don't even dare buying it online unless its a niche where substandard materials are unlikely.

Feels like the leather industry needs to launch an education campaign to distinguish the real thing from the cheap China knock offs... big marketing/branding opportunity for the sector. Most consumers, myself included, have no clue about grading leather, etc.

Leather still is a durable and useful material, if properly cared for. Assuming its production as a by-product of the slaughterhouse, it could be considered more sustainable than plastic (it can biodegrade).

Tesla and a lot of other car makers are switching to so called "vegan leather" in their cars. Which is a fashionable way of saying synthetic leather. In Tesla's case it is for everything except the steering wheel which they still use real leather for. It seems to be an admission that the real thing is still more durable under some circumstances.

It also says

> Just five years ago, prices soared after a drought shrank the U.S. herd to a six-decade low.

so the $81 high mark is probably more to do with the weather than the consumer trend.

This is explained near the beginning of the article. Just five years ago... leather outpriced itself, forcing shoe and clothing designers to cut the material from their products. Combine that with the rise of athleisure and the growing popularity of “vegan clothing,” and one can see why demand hasn’t come back.

It’s the intersection of high global demand for beef with its consequential byproduct of hides and the depressed appetite for leather goods in mature economies influenced by the long campaign against fur which coupled with vegetarianism and veganism have resulted in change in consumer behavior over time.

>a hide from a branded cow went for as little as $4 the week of July 15

That price point doesnt seem right. Can anyone point me where you can actually buy a cowhide for $4? or even $40? Quick search gives me ~$50 for calf hides. Even Chinese fake leather cowhide rugs start at ~$50.

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