German Perspective—28.07.09
04/08/2009
GERMAN PERSPECTIVE—28.07.09
What happened this week: There doesn’t seem to be any kind of normality at the moment and it seems that the market is trying to recover in the same period of time what it lost last year on the way down. If things continue the way they are at the moment we have a fair chance of achieving that. Things have been speeding up over the past four weeks.
While in the beginning it was only those who bought who had courage, we see now broad-based activity fired by those who missed the train and are now trying to limit the damage by not having been on time. What that is going to mean we will know later. While the shoe business has always been steady and bag and leathergoods probably even better than that, we now see the remaining sectors also recovering. The car manufacturers have got their production and sales in balance and the stocks they had sitting have also slowly been absorbed by the markets. As a consequence they have had to adjust their production forecasts for the months to come and this means also a strong recovery of leather productions. We will also know later this year if car sales have really recovered and if the increased demand for leather can be sustained, but for the moment it means higher demand meets lower supply and what tanners believed to be cloud cuckoo land some weeks ago is the reality today.
What is the best of all of it is, that almost nobody seems to be concerned. We just return to where we were about a year ago. If that is the true situation, than life is going to be pretty easy. Prices are still far below the level we saw in July 2008 and so there is plenty of room to continue to rise and plenty of margin for tanners to invest in raw material. In some cases this might even be true and the few who had been enjoying reasonably steady orders have indeed had probably one of the best times ever. However there were also many who had not enough orders and where the prices for the finished product had been hammered down dramatically. They are still today hardly producing at more than 70% and we had better not speak about the margins they might (not) have today after the raw material market has gone up. Maybe we are seeing for the first time ever the raw material market going up without claiming any victims, but that is pretty hard to believe.
The European customer base can have little hope of credit insurance keeping pace with rising prices, it looks as though we may have to wait to see if everybody is cash rich enough to pay their raw materials invoices either in advance or quickly enough to cover their raw materials needs.
Trading this week was limited, in great part due to the low kill and availability, even if there was still no particular shortage of interest. Asking levels were not fully achieved, but at least part of the recent price increases were compensated by higher selling prices. Interest was again across the board and, with the exception of low grades and very light material, everything on offer was readily taken up.
The kill: Right in the middle of the holiday season the slaughter numbers remain at very low seasonal levels. There was some discussion about a cull kill of dairy cows to support milk prices, but nobody really believes seriously in such ideas. We don’t foresee any rise in slaughter numbers for the coming weeks.
What we expect: In the coming weeks those who have the courage will continue to test how far they can push the market levels. Since many suppliers are very well sold ahead, a number has preferred now to hold hides back until the market trend is really clarified after the summer holidays. For the time being at least buyers found few suppliers willing to negotiate.
| 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 | € 1,35 | Firmer |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,25 | Firmer | |
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1,00 |
Firmer |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,85 |
Firmer |
|
|
30/+
kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,75 |
Firmer |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,25 | Firmer |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,10 | Firmer | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,00 | Firm | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,50 | Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,50 | Steady |
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