German Perspective—16.03.10
16/03/2010
What happened this week: No matter how optimistic many in the trade are, and how many reports there are predicting firm and rising prices, we have to admit that we find the situation increasingly difficult. There are still pockets of business where demand is outpacing supply and this can push prices higher, but for the standard and mainstream products replies today are pretty negative. Shoe-related hides like ox/heifers are still finding reasonable demand and asking prices can be obtained. Also heavy bulls are still not seeing too much resistance because production is low and there are still some gaps in production for tanners. However, we have been seeing for some weeks now more headwinds for dairy cows and standard bull hides.
Although there are many reports that the leather business is excellent—and this might be the case—it seems that there are limits in the courage of tanners to bet on further rising prices. The only argument we can still find for a firm market is the limited availability of hides. This does not really justify unlimited price rises, however. Without a return on finished leather that compensates for the cost of raw materials and production, raw material prices can never hold their levels. This might be the only and critical open question.
While tanners in Europe are more than convinced that there is almost no hope for sufficient price increases, it seems their Chinese counterparts are still undecided. For the time being, only the shoe upper tanners remain on track and continue to buy, but the upholstery tanners are far more cautious and are not following the market any more. Despite all the talk and enthusiasm, the $60 level is still a magic point for tanners in China and they know this. Without confirmation that leather buyers are going to accept increased levels, they are not willing to buy more than they desperately need and this has ended in a weekly hand-to-mouth buying. Another unpredictable problem for the overseas trade is the situation of shipping. Shippers from neither the US nor Europe can be sure how many containers they can actually move, and a booking is not a booking any more. Scheduled shipments and containers in port don’t mean much—any container is only shipped when it’s on the vessel and the ship has departed. Shipping rates have also become an issue because rates are increasing almost on weekly basis.
On the abattoir side the market is again entering into the usual chaos. Prices are made for political reasons rather than for market reflections; prices at the abattoirs continue to rise without any real market justification. The dollar is not delivering any further support and has lost rather than gained value during this last week. Sales during the week were rather limited to the sidelines. As already mentioned there was interest in ox/heifers as well as in some low grades and heavy bulls. For the rest there was inquiry for offers, but we did not find anyone who was willing to accept the asking levels. We realise there is resistance in particular to dairy cows in Asia at the moment and nor do we hear of any ready takers in Italy at the moment.
The kill: The kill is still not very exciting. In particular the kill for males is far below normal. Weights continue to be light and this explains the shortage of heavy material. We have no indication of any short-term change.
What we expect: We have no reason to alter our view. The market may remain firm until the shows come, but there is no reason to be very optimistic. If tanners are not making money they may invest their profits from 2009 for a while, but in the end, either leather prices will have to go up or raw material prices will have to go down.
| 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 | € 1,75 | Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,60 | Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1,40 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,30 |
Steady |
|
|
30/+
kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,15 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,70 | Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,60 | Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,40 | Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.10 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.00 |
Steady |
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