German Perspective—15.09.09
15/09/2009
What happened this week: In Germany there seems to be hardly anyone in the hide trade today who realises what the market realities are. Everyone seems to have the one and only aim of breaking competitors’ necks at the moment. The vast majority of the trade is finding it impossible to understand and to accept that the wind of change has finally reached continental European abattoirs and slaughterhouse groups.
What has happened already in many other parts of the world is now happening here and is meeting a processing and trader structure that has never prepared itself for the D-day of the hide business that had to come eventually. The general reaction is, as usual in this simple business, not to take a serious look at the situation, but a testosterone-driven ‘I am the strongest and I am going to beat them all’ style.
At the same time, butchers, and in particular those who are marketing their hides directly now, are rubbing their eyes and wondering how it can be possible for there to be such a large difference between the real market and what processors are willing to invest to maintain a temporary market share. Even more so when one considers that there is no particular shortage of material in the market that would justify covering activities. Except for extra heavy, fresh, good material there is not a single hide in short supply and with the recent move in prices, sellers are struggling to market their production rather than to cover a large order book and excessive demand.
Consequently the whole situation seems to have no logical solution and a lot of money will need to be moved before the pain is big enough to force the players back to normality.
As far as the business of hides with tanneries is concerned not much happened really. The few isolated buyers this week were confronted with high asking levels. For the few available heavy hides, a bit of success in selling was made, but far away from the levels one would need today. For the lighter weight and more standard types the market is far away from the asking levels or the prices needed.
The global market is taking a break after the steep rises and the weak US dollar had an additional negative effect on revenues. So, from the few bids to choose from, only those that were for shoe upper material were worth listening to. We decided to take whatever was reasonable, although the levels are far away from the actual buying prices. So, some ox heifers and bulls were placed, while for cows, tanners have decided to stay on the sidelines in expectation of a sensible market correction in the weeks to come.
With the good news from the general economy, decent business for consumer products in China and the massive growth for car sales in the mainland there is an underlying optimism among Chinese tanners and also the battered automotive tanners see the light at the end of the tunnel due to the strong performance in Asia. However, raw material prices tend to anticipate market realities and tend to reflect hope rather than facts and this seems to have have happened now. Prices have snapped back to represent a normal leather demand and business and this is certainly far too early looking at the flat performance of consumer demand in the Western world.
The kill: The kill is just strolling along now. Packer companies should be able to pay good money for cattle now, considering what they are getting for the hides compared to eight weeks ago. Anyway, we think that the kill is just going to follow its seasonal pattern and the colder it gets, the more hides are going to come into the pipeline.
What we expect: It seems that the market still needs time to sort itself out. Hides have catapulted themselves far out of the global markets and price structures. So, there are the only two traditional options now. Either competing origins will rise sharply with strong demand, or our markets have to fall back and to get back into line. We expect the latter to happen for the commodity products such as cows and lighter weights. The heavy and the top quality end (calf) may have a better performance since the demand for top quality raw material is still good with the typical limited supply. It seems that commodity buyers can still sit and wait a little to see if prices move in their direction.
| 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 | € 1,45 | Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,30 | Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1,30 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,10 |
Weakish |
|
|
30/+
kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,00 |
Weakish |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,60 | Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,35 | Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,20 | Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,70 | Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,60 | Steady |
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