German Perspective—05.05.09
06/05/2009
What happened this week: Last week we mentioned our concerns about the market and the possible risk for a push by speculators; if only we had known how close to the truth we were.
The selling market was nothing special but there is still some market potential in Asia. The real and regular customer base is buying normal quantities, but paying not at a penny more. Since the market prices in Asia are still significantly higher than the prices obtainable in Europe, any sale out there is better than waiting for the situation in Europe to improve.
Obscure elements
The problem remains the simple speculation of people outside the regular leather pipeline. It seems that packers and some processors are pretty impressed by the obscure elements around trying to buy hides. It seems that some of them believe in miracles and are either cooperating or believing the stories about the endless purchasing interest at whatever price. As a consequence, competition at abattoir doors is increasing and packers are finding it easy to get more money, despite no real market justification.
Now we are in a situation that nobody outside the beef industry could be interested in. After a more or less steady market in the first quarter, and safe and workable levels considering the circumstances, we are now returning to high market volatility and we have more than serious doubts that this is going to be of any good for the business.
There is hardly any justification from the leather business to believe in a safe basis for a firmer raw material market. It is pretty obvious that the volume of sales in the last eight or ten weeks was mostly based on speculation. Tanners and speculators were buying for stock, considering the low raw material prices. So far, so good, as this was needed to stabilise the market, but nobody believes that it is the result of higher demand for finished leather.
This could have continued into the summer and would have left us all on a safe market foundation. With higher abattoir price levels, this is changing now.
Everybody might like to see higher prices for different reasons. The offers during the weeks to come will tell us what buyers think about this. At best we might see some latecomers who are afraid of having missed the boat, but we don’t expect much more from overseas.
In Europe the market impression was also driven by some seasonal shortages for fresh bull hides. Eventually tanners were willing to accept incremental price increases which do not even cover the rise in abattoir prices that we saw in April, not to speak about further rises that people have in mind for May. Sales in volume were satisfying and prices were again incrementally higher for males and just about steady for cows.
The kill: In our area, the kill was reasonably normal. Others are reporting a low kill, in particular in the south of the country. Weights continue to fall, which is also a burden for calculations. The kill should now continue its seasonal decline.
What we expect: The coming weeks will tell us the truth about the market situation. There is no question that asking prices have to be significantly higher and customer reaction will tell us how many might be short of material until the summer break and how much others will invest to protect the stock position they have built up already. Nobody should be surprised by a show of massive resistance from the marketplace.
| 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 | Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,00 | Steady | |
|
Dairy
cows |
15/24,5
kg |
22,5/23,5
kg |
13/22
kg |
20/21
kg |
€ 0,80 |
Steady |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 0,70 |
Steady |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 0,60 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,05 | Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 0,90 | Firmish | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 0,70 | Firmish | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,50 | Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,50 | Weak |
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