German Perspective—03.05.11
03/05/2011
Both sides have good arguments and since one full container load can make the market, prices have started to ease a little. This was the result of some deciding that it might be better to wind positions down, while others were perhaps also impressed by the rumours about a decent amount of hides either already stuck or afloat and awaiting payment and pick up by the importer or the client. While this is an understandable reaction in a market that has run so far and so fast, others—of course mostly big sellers and packers—say the general demand for hides will not be affected, so they consider the situation to be temporary with only a short period needed until the the hides in question find new homes. They believe there might be a few little bumps on the road ahead but for the strong hands there is no serious problem and no change of the fundamental trend of the market.
Strong and sustained leather demand with a limited supply of raw material makes them believe they will remain in control of the market for the foreseeable future. US suppliers have currency on their side, at least for the moment. The dollar has lost about 5% of its value since the beginning of April and the markets were already apart before. Hide values are drifting further apart, which can also be easily seen by the rising number of weekly sales from the US to Europe. Some German tanners have already become regular buyers of US material. In our market the situation remains two-fold. While the heavy and good quality males are still dominated by the strong demand from the automotive tanners, the rest of the market is struggling to cope with the situation in general. Dairy cows and ox heifers are fighting with the weaker dollar and the problem of the weaker US market too, and this means their valuation, which has been wrong for a while, is more overvalued by the day now. Some players and the butchers still find it unacceptable that the valuation gap between the big blocks of dairy cows and heavy bulls is drifting apart and there is the unbelievable possibility that one article could possibly even fall in price while the other could stay. Not because the valuation is correct, but just because one is over-supplied and competing with other alternatives and the other is enjoying the exclusivity of shortage, which triggers a totally different price finding method. Hide selling is not easy these days. While bulls are still needed and the small availability can be placed just by gap filling sales, all other articles require for the first time in long time intense activity to move them. Selling the standard articles these days means selling at well below break-even levels.
Sales being made this week were rather political and we were just cherry-picking. While for bulls surprisingly steady money was obtained for isolated trades, neither the price level nor the volume of interest in cows were inviting at all. In the end, sales around Europe were higher than sales to the Far East. With the USD now coming close to the $1.50 mark against the euro, it is not really a surprise. Actually selling prices we have taken and what we have heard from the market were about 5%-7 % below what is written in the offer lists and there were numerous bids trying to test the market at a further 5% lower. This sounds disastrous but it is just a reflection of the valuation given to the material by the tanners, and that upholstery is the weakest part of the game.
The kill: Due to the Easter break the kill was pretty low. The weeks are cut by a day and Easter does not really encourage the consumption of beef. In view of the warm and dry weather farmers are in no rush to sell cattle and consumers are less keen to buy beef. We can’t find any reason other than a surprising export deal that could boost the kill in this traditionally low killing season.
What we expect: Well, our market is still struggling to get its feet back on the ground. Too much politics and too little economics are the drivers behind the scene. We still believe in further correction, more for cows and less for bulls, but without a common move and abattoir prices adjusting, it will remain pretty much the same.
| 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 | € n.a. | Weaker |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € n.a. |
Weaker | |
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ n.a. |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ n.a. |
Weaker |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ n.a. |
Weaker |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € n.a. |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € n.a. |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € n.a. |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € n.a. |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € n.a. |
Steady |
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