German Perspective—22.09.09
22/09/2009
What happened this week: As in almost all other markets around the world our trading activity has slowed down to very limited levels and only the few items that are presently in reasonable demand are generating any trading activity worth mentioning. This applies still to the better and heavier end of the bullhide range and only to some extent also to lightweight hides.
Tanners inventories still seem not to have enough of these hides, although this could change rather soon if leather demand fails to pick up the way many are anticipating. It should not be ignored, that a great part of the recent interest from European tanners that buoyed the market is more about replenishment of the pipeline than an indication of significant recovery of leather demand.
In many cases tanners have been operating with stocks well under par following the highly uncertain business outlook before the summer holidays; they have needed to purchase, in particular heavier and better qualities. Whatever positive market analysis some were making it should not be forgotten that German hides, too, have a certain value and need to fit into the global price structure, which in the vast majority of cases they don’t any more.
Demand is not strong enough at the moment to boost the prices of other origins, and the ongoing decline of the US dollar has not helped the situation either. Consequently, the prices being paid today at the abattoir still represent cloud cuckoo land rather more than a fair value price level. The reason for this is also known and any return to reasonable levels is dependent on the usual suspects in the children’s playground. Such periods have been seen a number of times before and are painful and temporary, but end normally and unfortunately with a big bang.
Meanwhile, global hide trading volume is declining. Most major hide supplying origins are reporting substantially reduced interest and many suppliers are now watching their order books eroding quickly. At the same time, a number of Chinese tanners are also seeing their inventory of better quality hides melting away and with the demand still being focused on the medium higher end, they also will have to take decisions in the coming weeks on either downgrading their selections with their clients, paying some of the higher levels established over the past months. By mid-to-late October at the latest, these decisions will be taken, but no matter what, it will never justify the prices being paid already today at the abattoirs.
Business in Asia this week was also pretty slow. Inquiries are coming in, but Chinese tanners are also finding it pretty difficult to accept that the good days are over. Business was too easy in the first half of the year and money too easily made for them to accept suddenly that this should be consigned to history. One hears about a number of issues of cheap contracts not being shipped any more by suppliers. One also has the impression that with the present prices of regular hides a decent number of cocktails are mixed for shipments against elder and cheaper contracts. We would not be surprised to hear in October and November about unhappy tanners checking their arrivals. With the first half of September having passed already, initial reports showing how leather demand re-started after the summer break are not particularly encouraging. While all polls and financial experts paint a very positive picture, consumers remain far more cautious and is not willing to bet with his wallet yet on the strong recovery of the economy. Hardly anyone is reporting very positive signs from the initial order intake after the summer break. Discussions about the relative rise in leather prices are mostly in vain. Prices for hides this week were mostly steady for males while there was hardly any interest for females.
The kill: The kill is steady at the moment, but with the good weather one cannot see much chance for any significant improvement in slaughter soon. Weights are still fairly low and have not shown the normal seasonal gains yet.
What we expect: The market needs to sort itself out. The spread between the real market level and the abattoir prices has to be closed eventually. The global market is still in consolidation mood and there is little indication that prices have any room to edge higher in the near future. The question remains as to how deep the correction for cows needs to be to stimulate any significant interest again. For bulls the market is presently stable at the present levels, but we don’t think that there is any upside potential anymore.
| 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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