German Perspective—29.09.09
29/09/2009
What happened this week: There is still little to add to the statements made last week. Our market continues to struggle and with the hides not representing their fair average value it is increasingly difficult to find enough buyers to buy hides at asking levels. For the moment it is still quality that is selling. The male section is still performing significantly better than the dairy cows.
Automotive tanners are still on their replenishment tour. Leathergoods and also shoes are still the top performers on the demand side while the garment and upholstery segments are not seeing any serious improvement in consumer market activity. Apart from the simple volumes it is also a matter of price. Leather prices are not moving in a direction that would justify present raw material prices and this is something that tanners are reflecting in their purchasing activity. The hype of the second quarter is gone, prices are way above those levels and consequently there is little ambition to follow the hide market for cows.
Consequently we have to deal with realistic price levels which are close to the levels that we operated at in June and July, and for us in the euro zone this means a revenue that is another 8%–10 % lower because of the decline of the US dollar.
These are the market realities and they have been camouflaged by general enthusiasm, and by the absolutely useless and senseless conflicts in the abattoir market. For male hides the situation is less evident because of better margins and steadier sales. However, fundamentally the same rules apply. The situation is also reflected by the volumes of sales. While many were still sitting comfortably with existing order books and did not bother too much about the declining sales and, rather, were still driven by the very temporary shortage of fresh bullhides, they completely overlooked the fact that the market has never really responded to any of the sharp price gains. This was in the summer, when sales are traditionally lower, so it was not really taken seriously.
The general consensus was that the crisis was behind us and we were continuing where we left off last September. Warning voices were completely ignored and endless justifications were found as to why raw material prices were where they were. While for some grades, such as top quality hides and specialty items, good reasons could be found and certain developments had to be accepted. For the more commodity type products, the same was never justified and without the massive purchasing support from the Chinese productions, they would never be cleared these days. Anyone who has a bit of trading experience with China knew in August that not much support for higher price levels could be expected. That is where we stand today and with the rising kill a lot of the courage is fading quickly.
Trading this week was reasonable despite the comments above. There was decent interest from Asia for male hides and heifers. Prices are good in comparison to the international price levels, but far from the levels that would compensate for the levels one has to pay at the abattoir doors. Interest in and bids for cows were hard to come by. From Italy there were more rumours every day about falling asking prices and bids for fresh dairy cows. The only bright spots were lights and kips and calf, for which there was still reasonable interest at steady levels.
In general, trading activity was a bit better than in the weeks before, but still far below normal and reasonable levels.
The kill: The kill is starting to rise. Weights are still well below normal and are not yet rising according to the season. The weather is still pretty warm, so we do not expect any real increase before temperatures and weather conditions deteriorate further. It seems that a substantial rise will only happen later in October.
What we expect: We have to admit, that we don’t like the market. We have not liked it for a while already, but that wasn’t a very popular view and one alone can’t pee against the wind without getting wet. It seems, however that the wind is changing now and the market realities are also reaching our part of the world. The holidays in China in the week to come will also keep market activity under control and in Europe lacklustre trading conditions might dominate for a while. However, with a correction of 10%–20 %, demand will be stimulated again and this should be the realistic level for the beginning of the last quarter. Certainly for cows.
| 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 |
€ 1,10 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,00 |
Weak |
|
|
30/+
kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,90 |
Weak |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,60 | Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,35 | Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,20 | Pressure |
|
| 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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