German Perspective—16.11.10
16/11/2010
Whenever more of these special and extra heavy hides are produced, problems start. Their customer base is so restricted and the supply chain has, due to the historical demand for fresh hides from the automotive tanners, refrained from holding enough capacity for salting and storing the hides. The market pressure on this material remains and even the escape into wet blue and contract tanning is presently not enough.
The customer base for these extra heavy hides is jut not enough and despite the good business for leather these particular hides are not fitting into the price and product range of the global tanning industry. However, this will change as soon as the kill declines again, but for the moment and the near future it is not easy for those involved. For the hides below 50 kilos the situation is certainly much easier. The stable markets and the persistent demand for leather have been widening their customer base over the last few years and as they get lighter, they fit better into the global price structure. The steep fall of the US dollar made them too expensive for a while, but this week’s recovery of the greenback in combination with an adjustment in abattoir prices has brought them back into the competitive range. The pipeline is—except for the extra heavy material of course—still not overstocked and with the continuation of the good performance of many consumer markets (Asia under the lead of China, Russia and so on) it doesn’t seem that any serious congestion is ahead, which should safeguard the market at present levels. We have always been of the opinion that it was never a problem of demand, but only of price and this is now sorted out and the market has found a level. So far so good.
On the negative side one has to realise that price pressure on the finished product side is not fading. Although the demand for leather remains good and car and luxury companies are setting one sales record after another we are still facing strong price pressure on leather. The substitution of leather that we have been expecting since spring when raw material prices were shooting up is in full swing now and you only have to check the furniture shops to realise how much artificial material has substituted real leather this season. The problem remains that leather is replaceable in many products and if the alternative materials—which cannot fully replace the natural product, but have improved in quality—are more attractive in price they will be considered. Even the luxury product makers are keeping prices with their exclusive position in the top end well under control.
The market is pretty much in the balance and the leather industry is holding the balance by controlled buying and short term dispositions. As long as the demand for leather or the kill does not alter significantly we have a fair chance of holding levels steady for a while. It seems that there are not many interested in major changes at the moment. The calendar and the fiscal year are now winding down quickly and hardly anyone is really interested in any substantial changes. So, one should expect that the present levels have a fair chance of remaining valid for the next few weeks and it would need something special to push them out of range.
Trading was rather normal this week. What was offered at steady levels this week was also taken. With not too much unsold material (except the extra heavies) around and shipments still being being totally steady, the product flow remains intact. Prices are steady due to the assistance of the stronger US dollar, which is compensation for any smaller price concessions that possibly had to be made for political reasons. The volume of sales was nothing special but still good enough to keep the flow of product intact.
The kill: Due to some beef export sales, the kill remains good and the weather is bringing more cattle off the fields. The numbers are pretty high and most people expect them to stay on these levels until the week before Christmas. Weights in our area are still below normal levels while in the South they are pretty high, which is one of the fundamental reasons for the imbalances.
What we expect: It seems to us that for the time being the market has found its base. There are still some imbalances, which we discussed above, but since this market segment is pretty specific we don’t think it will mean much for the total picture. In a next step one has to think already about 2011. If the global recovery continues and the financial markets remain stable we should see inflation returning. This would allow for higher raw material prices. However, rising costs for transportation, labour and chemicals will keep tanners pretty much on the defensive side when it comes to investing more in hides and skins. We believe, that this will actually remain a very big problem and it might seem easier to fight against higher hide prices than against the other parameters. For the next few weeks, it seems that the levels are set and most programmes are fixed until the rest of the year. Prices should consequently stay stable with variations in narrow ranges. Currency movements may possibly be a factor again.
| 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 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,45 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,30 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,80 |
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 | € 1.15 |
Steady |
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