German Perspective—12.05.09
13/05/2009
What happened this week: What happened this week: The market this week was trying to digest all the enthusiasm which had been built over the previous weeks. People see stock markets and many other commodities rising in price and the financial markets are trying to deliver positive news or, at least, the impression that the worst is already behind us. One may believe that or not, but a good part of the tanning industry seems to believe that it is wise to buy raw material at the price-levels of today.
Buying activity continued and reports from the US were impressive again on export sales for the previous week and on selling activity this week. In Europe things were still reasonably quiet except for automotive tanners who, for the most part, were suddenly willing to purchase and also to pay more money this week. Not much and not enough to compensate for the rise of the abattoir market, but still impressive enough considering their complaints, and the reports from the auto industry in general.
The driving force behind the market activity are still the Chinese tanners. They are definitely still buying more than they actually need for current leather orders and their focus remains on the premium origins.
There was quite a bit of resistance this week as far as price-increases were concerned and the decline of the US dollar, which accelerated as the week progressed, absorbed much more than any fractional increase in export prices was able to offer. The open question everybody is still trying to answer is whether the leather business is, or can be expected in the months ahead, able to justify the massive purchasing activity we have seen for quite some weeks now.
We must not forget that this is almost entirely concentrated on the medium-higher end of the quality range and so it is still not covering the full range of hide production. This leaves open the question of what is going to happen when prices finally go up. Is there enough demand to sustain the trend and will this than finally spill over also into the other more economical hides?
Those who are less enthusiastic still fail to see the justification from finished leather demand. No matter what we see in raw materials, it is not reflected in the finished leather business yet. However, it is also true that the hide market has always been a trend indicator being six to nine months ahead of the general economic, or at least retail, trend.
So, we still need to see if it is a trend for the better or just a false alarm and a trap leading us into a dead-end. For the time being the market is pushing forward with European prices facing more complications as the US dollar rapidly declines. The falling kill and weights are in conflict with each other and in combination with the falling dollar, prices in Europe are still pretty much capped for the moment.
Sales were reasonable this week with some cows still moving into the Far East and some of the EU automotive tanners covering short-term orders for specific leathers. Price was a fraction better for cows in dollar terms, but not in euro, and moderately better for heavy bulls.
The kill: The kill did not supply any surprises; it was moderate, with falling average weights. Being in the low season we don’t expect any improvement for the time being. Weights are low and will continue to fall in the coming weeks.
What do we expect: No matter how good volumes may look, we will suffer from the weak dollar and this will keep prices under control. From the EU market we still do not see any stimulus and so we have to continue to live from week to week checking the demand from Asia. Shipping space is another problem we need to watch, and we assume that prices will remain steady at the top of the trading range. This is something we have been seeing already for a while.
| 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 | € 1,10 | Firmish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 0,95 | Firmer | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 0,75 | Firmer | |
| 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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