German Perspective—17.11.09
18/11/2009
There is support for this position by the number of inquiries coming in from odd origins; people who would not normally even think about better quality hides from Europe are now starting to sniff around to see if hides might be available to them at still reasonable levels. At the prices quoted, though, people from these destinations are backing away quickly. In trying to figure out why and where this interest is originating from, you have to conclude that in traditional hide-supplying origins like South America, South Africa or Australia, the better selections have become pretty rare, while lower quality materials are still seeing decent inventories. This is also confirmation of the trend we have been seeing for almost all of 2009, that leather demand is almost entirely focused on the medium and higher end of the leather production.
Stock burden
So much for the good news. On the other side, many tanners have figured out that they are starting to be burdened by their low-quality stocks. As long the hide prices were cheap they were easily financed by the returns for better quality selections, but with today’s prices the calculation isn’t working out any more and the situation is starting to create pain, even more considering that leather demand doesn’t seem to be strong enough to absorb all types of leather.
This is actually creating a pretty sensible situation. Should the tanners now press hard for higher prices for the better material and risk losing orders? Should they reduce production and stay out of the market in the hope that raw material prices will decline, or have the courage just to carry on in the belief that sooner or later 2010 leather prices will be strong enough to force the prices for economical leathers to follow the market?
Anyone who has full confidence in the global economical recovery in 2010 and who believes that that inflation is going to be an issue for 2010 will have an easy time. There is nothing wrong with investing liquidity into commodities as this should protect your business and your money. For the rest, it is not so easy and decisions need to be well valued and considered.
For week-to-week trading, one was impressed by the strong performance of the US market. After some weeks of decent sales we have to mention, that this one was pretty quiet and interest and inquiries were far less than in the weeks before. Whether this was more a result of not being too active in offering or it was less demand and a more cautious position of buyers might be seen in the weeks to come.
The US dollar seems unable to decide which way it wants to go and after having made another quick visit above the 1.50 level in relation to the euro, it fell back to where it was a week ago. This did not offer too much stimulus for any direction of the hides market. Talking to some of the premier league tanners, many are actually quite satisfied with the recovery their businesses have seen since the summer. This applies in particular to the European tanners. They are complaining that they could sell more good-quality leathers, but they don’t really know what to do with their lower grades. Many of them are also looking around to see if there is anyone willing to sell them medium-to-high end selections only. Sales were pretty scarce this week and it is going to be interesting to see if this will change next week with the tailwinds from the overseas markets.
Prices were entirely steady and, for the little interest seen, possibly even at a moderately higher level. We see still male hides much more favoured than females.
The kill: Our enthusiasm about the kill from last week faded quickly again. The kill hasn’t improved any further and weights are still relatively low. There are still not enough males in the slaughter mix and it seems we will have to wait for the kill for the Christmas season to see more premium cattle in the abattoirs. Beef business seems still to be insufficient and not supporting slaughter.
What we expect: We have been pretty conservative about the market outlook in recent weeks despite the satisfying sales numbers. Well, we might have been too prudent as far as better quality hides are concerned and it seems that the underlying need to buy is strong enough to protect the market for a while. In particular, because many sellers had sold forward in October, it left the latecomers with only a few hides to buy. The market certainly has a secure base and it is going to be interesting to see how buyers react to slightly higher asking levels in the next weeks.
| 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 |
€ 1,00 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,90 |
Steady |
|
|
30/+
kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,80 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,50 | Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,20 | Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,15 | 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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