IF YOU think cattle prices have taken a hiding recently you are right . . . literally.

A collapse in the hide market is a key reason why the Eastern Young Cattle Indicator fell nearly 15c last week to 322c/kg carcass weight.

The fall was much greater in Victoria with its indicator down to 300c/kg, according to the National Livestock Reporting Service.

Export hide prices have fallen 40 per cent in two months and have halved in in US dollar terms.

Leather products, like wool apparel, are a discretionary spend. When times are tough, they are the first crossed off the budget.

Australian Hide, Skin and Leather Exporters Association vice president, Victor Topper, said the leather industry was reeling from the global economic crisis.

Mr Topper, who also is co-principal of Australia's largest hide exporter AI Topper and Co, said the crisis was most severe in the US where the market for luxury cars, up-market furniture and fashion accessories had died.

He said Australia's export market had also been hit by an over-supply, particularly in the drought-affected south where abattoirs were processing at full capacity.

"We can only respond to our Italian and Chinese markets which are affected by a downturn in orders and a shortage of credit," Mr Topper said.

"We've got to consider demand and currency and back that into a price to the abattoirs."

The NLRS quoted $36 for a southern hide off a 180-220kg steer carcass in September.

That price had dropped to $28 last week and is expected to fall further.

There were reports last Friday that the price for the equivalent hide had fallen to $20.

Mr Topper said the fall of the dollar had not helped much, particularly when importers were more concerned about reducing their orders rather than bartering a price.

The problem was much starker in US dollar terms.

Exporters paid abattoirs $36 ($US29) for a southern hide in in September while today's price is US$14.

That's a long way from the peak price of $65 ($US53) in May.

The sharp drop is also hitting hard those exporters who are locked into a schedule of monthly prices with abattoirs, when price movements take time to reach the saleyard.

The exporters association said hides, at their peak price, can equate to 20 per cent of the farm-gate price of a domestic steer and more than covered the abattoir's carcass-processing costs.

The rate for a green hide off a $650 steer was only about only 4 per cent on today's ruling price.

The dilemma for the hide exporters and the leather-finishing sector is the difficulty of stockpiling either salt or brine-cured or the semi-processed wet blue hides.

Salted hides, which account for half of southern exports, can be stored for a year if properly salted and treated with bactericide.

But in today's economic climate, no one has the resources to do that.

Mr Topper said the hide market would only recover once stocks of leather had been cleared.

That would only happen when the world recovered from the financial meltdown.

Luke Hardwick, of Hardwicks, said the ruling hide price would hardly cover half the cost of processing at his Kyneton works where 3000 cattle were processed.

He said hides prices at his works had halved in two months.