What happened this week: Talking about last week’s German hide market is a bit difficult because the market was completely twofold. The selling market for hides was in the low gear we expected. There were a few inquiries here and there from tanners who are still not disposing of the inventory they need for September and there were some Chinese latecomers, but nothing really worth mentioning. It was a completely normal week for mid August.

Prices edged a fraction higher, but were still struggling to obtain the full levels paid a month ago at the abattoirs. The last three months have seen sharp gains in prices with almost all stocks being absorbed. With the low kill in the summer, some sellers being caught short and others holding hides back, it seems that, for many, there will never again be enough hides to satisfy the appetite of the global leather industry.

In this market pattern, hide purchasing for August came at absolutely the wrong time. The largest German abattoir group has now taken control of more hides and the decision to contract process them and to market the hides under its own name in future has taken another substantial number of hides off the processor market. In the present market situation it worked like a spark in gunpowder—it simply exploded.

What we saw this week has never actually been seen to such an extent before. Prices shot up by 20-30% compared with the prices paid in July and this is mainly because the 'usual suspects' behaved like schoolboys fighting for the top prize, which was already destined for the ‘college boy’. If only they had known and accepted it. Tanners will not be too amused about the situation and, while the US and European market have been walking pretty much hand-in-hand for a long time, we have now taken such a sharp jump ahead that it will be interesting to see what happens to the market in the coming months.

Meanwhile, packers are pleased to see such unexpected windfall profits coming in from the by-product market. This has been heartily welcomed as margins in the beef business are not really good, so the extra €10 per head is a pleasant surprise for the calculations and a nice platform for the start of the killing season in September/October. It is the tanners who are buying fresh hides with regular programmes that are not so happy. Whatever they have to pay in the end it will be far more than they budgeted for. Trades concluded up to the middle of last week were at slightly better prices for cows. We won’t have to wait long to find out how the market will respond to the new levels. 

The kill: The kill remains at low and seasonally normal levels. Weights remain pretty low, but are nothing unusual for this time of year. Towards the end of August the kill should moderately rise, and towards the end of September it should reach normal levels again.

What we expect: The hide market always needs something to finally break its neck. Recent events certainly have a fair chance of being the trigger. The unanswered question is still related to leather demand and prices paid. Looking at the hide prices of today and the levels a year ago, it looks pretty tight. Leather prices have certainly suffered during the crisis, so the real question is by how much and how this meets current hide prices and demand. August is not a good month to judge so we will need to have enough patience to wait until the end September to get a real idea of the situation.

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