German Perspective—26.10.10
26/10/2010
Market activity was a bit mixed with some interest here and there, but a lot of potential buyers just disappeared when it came to serious discussions. Tanners are still trying to save money and are not particularly willing to buy at asking levels. As long as the alternative origins are not making any serious progress in prices our hides are not really attractive and tempting buyers for any extended purchasing at the moment. Although leather demand remains good (except in upholstery) it doesn’t seem that tanners need urgently to replenish inventory and so they remain pretty selective in their purchasing activities, at least for hides that are not particularly attractive in price. Interest was patchy with no real pattern. Enquiries came in for dairy cows, some bulls and low grades, and in the end most of the sales were done on low grades. Sales for bulls were limited to a few renewed programmes but no additional interest was seen. The market for dairy cows was a bit confusing. At the beginning of the week interest from China was quite high and we were quite optimistic for a week of good sales at steady levels. As the week progressed, more information came in of our competition selling at discounted prices into the Asian markets, which did not make things easy for us and made many clients turn away and wait again. The situation is pretty strange. Normally at this time of the year activity is rising from week to week. Tanners have their busy season and sales in the last quarter of the year are normally pretty strong, as the kill normally is too. This year it hasn’t really taken off yet. September was busier than October so far and this is unusual. For the time being it is rather a hand-to-mouth business, confirming that not only are tanners unhappy with raw material prices, but also that they are willing to risk continuing hand-to-mouth buying. It doesn’t seem that they are too concerned about raw material prices increasing further or raw material supplies becoming hard to get. Maybe they have already put enough under they belt to have covered most of their production needs for the months to come.
With our European customer base this is definitely true for the period until the end of November, or maybe even a bit longer. So at the moment, we go week by week without a serious increase in activity and it seems that tanners are trying now to hold out until the raw material market has come back to the levels they are targeting. This could be a dangerous strategy as it would not only be a question of buying cheaper, but if the market received an increased downward push it could also become a threat again to leather prices.
One can also see more offers from odd origins in the market. Sources that hadn’t been offering any material all summer, claiming to have constant demand for anything they produce, are now looking cautiously for buyers again. This means that they have come back down to earth too with price realities finally catching up with them. Adding it all up we still see a decent leather business, but the whole situation is a bit awkward. A number of players are still quite aggressive at the abattoir doors and are overpaying for hides, at least in relation to the standard market levels. On the other hand there is no short-term indication that the global leather industry is willing to surrender and to pay more money for hides. It also seems that they can hold out for some weeks now if no unexpected flurry of new leather orders comes in to force them back into the market. So the market is continuing to walk on a very sharp edge.
We are still too positive about global leather demand to believe in any extended downward moves, but there is no question that the scale of the market is now very, very slowly moving towards increased price pressure again. So far it is nothing serious and a short flurry of larger sales would solve the problem quickly, but if we see some more weeks like the last ones, some players could be forced again to stimulate sales via price.
We know that a number of people do not share our opinion and hope or expect exactly the opposite scenario with a sharp rebound of sales and prices. Consequently, there are interesting times ahead. Prices this week were again on the weak side of stable, with very little actual movement in prices. The US dollar offered only a day of relief and this was too little to actually bolster prices. Sales volumes were just about satisfactory. If reports about the sales of our colleagues are correct prices for dairy cows were even weaker.
The kill: Bad weather has increased the kill again. Cold and rainy days and nights are bringing cattle quickly off the fields now. With colder days, beef demand starts to increase slowly too. There are still rumours about large export sales of beef being in the pipeline, but we haven’t heard of any confirmation yet. Anyway, the weather and the season should support the kill and slaughter numbers should be good for the weeks to come. Weights are still not gaining to the levels one would expect for this time of the year.
What we expect: We still fail to be fully convinced that our market has reached a solid foundation yet. We believe it would really need a week or two of convincing sales numbers to believe that the risk potential has finally gone. Tanners are still stubbornly defending their positions despite the generally good performance of the leather market. So we continue to wait and see and expect the market to be managed further by currency fluctuations and political manoeuvres before it is really settled.
| 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 | € 1,85 | Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,65 | Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1,65 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,45 |
Weakish |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,30 |
Weakish |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,80 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,70 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,50 |
Pressure |
|
| 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 | € 1.15 |
Steady |
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