New Zealand's largest sheep processor and exporter Alliance Group says cuts to prices paid for skins have contributed to falling income projections for beef and lamb farmers.
The Alliance co-operative has 5500 shareholders and executives has just attended a leather fair in China, where many of its about eight million skins go each year. That trade accounts for about 5% of the company's revenue.
Alliance Group marketing manager Murray Brown says prices have dropped 25% from historical highs of about $138 for a dozen lamb grade skins.
But Mr Brown says the longer term outlook is more positive, because there are projected shortages in the medium-term supply of skins.