German Perspective - 5.5.15
05/05/2015
Many of the published prices have been questionable for some time, and nobody knows where the market is really is. The only thing one can say is that the prices are lower than they were some weeks ago.
There are still niches that are defending well against the trend. In the high-end sector, hides are not in oversupply and those that need specific material have to pay the price or run the risk that they might be gone the next day. However, this is the minority.
Too many suppliers believe their product is special and claim values that cannot be achieved, because there are plenty of alternatives - if a tanners knows about them and is willing to use them.
As far as the European market is concerned, many have needed a long time to understand the situation and as usual, when it comes, it comes fast. The rebound of the euro, the relative drop in overseas prices and the various issues in regards to payment and shipments have created worries – although not crisis.
The problem again is how to separate truth from fiction and who you believe in terms of prices. It is fair to say that the smallest drop quoted is around three dollars per piece and the largest something like eight dollars. If you combine that with a currency variation of about 5% versus some weeks ago we are talking about revenues for a European exporter selling to Asia between 10% and 15% lower than they were prior to the Hong Kong fair. This kind of drop exceeds the wildest imaginations people had in April. It was simply too comfortable when the currency effects were negating all kinds of market problems. It might have been another good lesson for those who do not understand that there are so many factors influencing price trends.
This week, trading was light and bids from Asia were aggressive. We have decided not to take any of the low bids, in particular for dairy cows. Buyers say our competitors have taken low bids which would be $5 to $7 below what we consider prices made during the previous weeks. Compromises could not be found. That left all our sales activity in Europe or other places.
Sales were mostly focused on bulls and low grades that could be moved at steady or fractionally lower prices. We think volumes traded were limited, unless somebody took the low bids where larger volumes could have been placed.
The kill: The kill is still pretty low. May is traditionally dominated by low numbers due to holidays and weak demand. Weights are now rapidly falling and so we are dealing with low kills and falling weights.
What we expect: The market is still trying to sort itself out. For Europeans, the realities have arrived. A weaker US dollar and much lower levels overseas have wiped our competitive advantages away. For a long time one had only to decide whether to sell or not to sell with no worries about price. It will take a while until a new balance is found.
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