German Perspective—24.03.09
23/03/2009
GERMAN PERSPECTIVE—24.03.09
What happened this week: The optimism of many suppliers in Europe got a wake-up call this week. The freefall of the US dollar, which resulted in a gain of up to 7% for the euro, carried a lot of the attraction of European hides away this week. What started 10 days ago with the US suppliers lowering their prices was extended by the currency market this week.
European hides, which had been selling well into the only active producing market around the globe, China, are mostly too expensive today. Since total global demand is still not enough to absorb all hide production, the focus of interest of the Chinese buyers has returned to the US.
The recent export sales statistics from the US have confirmed this, and what the US sellers gained was certainly lost in Europe. So the concerns that we have expressed over the past two weeks have unfortunately turned into market reality. Consequently, trading was again light this week.
We could not trace any serious bulk interest and sales and activity were rather sporadic and limited to some isolated specialities. What the European market is missing now is significant follow-up to the strong market performance of the first two months of the year. If there is anything positive to report, it is the request for shipment of existing orders, so at least product flow is reasonable at the moment.
Although many report a pick-up in leather orders we remain pretty cautious. The business in side leather is much better and the performance of the domestic market in China is much better than anywhere else in the world, but the declines in automotive production and the seasonal decline in the furniture business can certainly not be compensated for in the short term.
There is no question, that in many parts of the world, private consumption is not meeting existing production capacities and the production of raw hides. There might be isolated market niches where situations are significantly better, but in general the imbalance between existing stocks, present hide supply and leather demand is still not back into a safe situation. A few weeks of lower sales have been enough to force almost every origin back into price concessions, even if it is only for the sake of currency movements rather than for demand reasons. However, we should not forget that the constant reduction of credit covers and increasing delays in payments in Europe is also restricting the market potential for many suppliers.
So, the market is still vulnerable and carrying a high risk potential, and support is mainly only coming from the speculative positions that some of the sellers are taking because they feel, after a period of better sales, that there might be a chance to hold back from the market in the hope of prices going up.
Any real justification, however is difficult to find. The only serious hope one can have for the near future is that a larger volume of leather orders is still in the backlog and if they are executed soon it could trigger another round of buying and shipping to absorb more of the hides that are still searching for outlets. The few sales made this week were on steady levels.
The kill: The kill improved a little and stands now at about the numbers one would expect for this time of the year. This should be the situation until the weather is warmer and cattle can return to the fields.
What we expect: Higher abattoir prices are in conflict with the lower US dollar and the market will struggle to find a solution. So we believe that official prices will not move by much, that variations will be little and negotiations very difficult until after the APLF exhibition in Hong Kong.
| Type | Weight range | Avg. green weight | Salted weight | Avg. weight salted | Price per kg green weight | Trend |
| Ox/heifers | 15/24,5 kg | 22,0/23,5 kg | 13/22 kg | 20/21 kg | € 1,30 | Struggling |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,00 | Struggling | |
|
Dairy
cows |
15/24,5
kg |
22,5/23,5
kg |
13/22
kg |
20/21
kg |
€ 0,80 |
Struggling |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 0,70 |
Struggling |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 0,60 |
Struggling |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,05 | Struggling |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 0,90 | Struggling | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 0,70 | Struggling | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,50 | Struggling |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,50 | Struggling |
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