German Perspective—07.06.11
08/06/2011
What had been an open secret for some time is now turning into reality with a lot of buyers telling stories about what has happened to them with regard to deliveries in the past six months or so. Not that one needs to have any compassion for any of them because anyone who still thinks there are price miracles or that bad guys suddenly become good guys must not complain. Even worse, history is repeating itself in the market with rising prices and the games played with quality and weights. It is amazing to see what is still being done and what many sellers still believe can be done. Since the market climax and the correction, price rises are no longer protecting the players of these games, so some suppliers are getting stuck with hides because their buyers are no longer willing to play the game and—mainly overseas—buyers are trying to negotiate and get compensation for what has happened before. Both sides are seemingly not very happy with the current situation.
For others the situation is certainly much better. Many buyers have suddenly remembered where it was they used to be supplied fairly well under whatever market conditions and they are desperately trying to re-establish connections. Well, it is a pretty difficult task when there is no free lunch. The number of ‘reliable’ hides doesn’t get bigger just because you want them to–and they have their price. So, the demand is still there but not hides in the price and quality ratio a lot of people expect.
Apart from this local issue the international market is still being shaken by the investigations in China. More and more traders and importers are under investigation and the cases are now spread all over the country. More and more containers are getting stuck in ports and a lot of the inflated demand we had seen is fading like a balloon slowly deflating. In Southern Europe there are a lot of stories about import problems from Central and South America, as well as Africa, because of missing licences from the supply source for export to the EU. Since a lot of these hides had been bought with deposits, many tanners and importers are very concerned.
As if this were not enough, a lot of tanners in China have begun to complain about payments from their clients that are getting later and later. So, most of this week’s news is rather negative, although most of it is related to non-standard businesses. The first news from the shoe and leather fair in Guangzhou last week was a bit of a mixed bag, but it seems that a lot of the steam has gone out of the market and today the upholstery market in China is better than the shoe market. It’s a long time since anyone said that. This explains however why the dairy cows business in Asia is doing better than the steer business. Part of it might also be related to the fact, that most of the larger upholstery tanners are not involved in the tax evasion issue at this stage.
Sales this week were consequently mostly focused on dairy cows for Asia and some business with automotive tanners. The shoe tanners overseas have been pretty much on the sidelines and are trying to stay out of the market. They are also convinced that prices will come down. The high killing season in the US and the problems in China make them believe that it’s best not to run after hides at the moment. Price negotiations have been pretty tough also this week. The weaker US dollar hasn’t made things easier and it took quite a long time for price agreements to be established. Even then, revenues still don’t meet the price levels paid at the abattoirs. Consequently, the whole trade is looking at negotiations for the month of June with a certain horror. Although tanners want to buy somewhat cheaper, they are not keen to see prices falling too much to safeguard their leather contracts and prices. This doesn’t make things any easier at this time of the year.
The kill: For the hide business we are in the worst time of the year. Low numbers, low weights and short weeks. Except for the weather, it couldn’t really be much worse. Parts of Europe face a drought and some expect additional cattle to be slaughtered. For the next few weeks the numbers will be low.
What we expect: Over the past weeks it has been impossible to remove the fundamental bearish tone. The market is not in any serious danger, but demand and the fundamentals are still not strong enough to make one believe that prices could rebound soon. There are certain types and articles that are still in stable condition, but more hides every day are failing to ready buyers. Maybe we are entering the perfect world now with prices gradually sliding. This would make tanners happy and possibly even make leather production profitable again after the summer break. Well, normally things never develop according to plan, so why should this summer be different?
| 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 | € 2,20 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.95 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.95 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.75 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.60 |
Weakish |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.20 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,95 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.75 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.35 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.35 |
Steady |
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