German Perspective—20.09.11
20/09/2011
For many tanneries rising abattoir prices came as a shock and surprise because there is no real market justification for a trend to higher prices. The higher prices at the abattoir door can hardly be justified. So the situation is a bit like in the oil market where perspective would actually lead one to expect lower prices, but some interested parties are still willing to hold prices up. It was the usual suspects pushing prices up again at the abattoir door and if it is not just politics or window-dressing of stocks it can only be explained by the firmer US dollar and the better-than-expected results from the All China Leather Exhibition. Possibly the strong performance of the car industry and its export sales also added to the optimism. Despite the problems in the US and Europe a number of players around the globe are convinced that hides and skins are a good investment; lower slaughter numbers will keep supply under tight control and prices will not see any major declines. Consequently controlling supply and managing stocks is for them top of the priority list before.
This seems not only to be the issue in our region, but can be seen in other markets too. That leaves the market and the players with questions on where if anywhere hides have a fair valuation. Since the prices went sky-high in spring only moderate corrections have taken place. In the meantime it is common sense that profitability in the tanning industry is well below acceptable levels and current price levels are only justified by the reasonable order books still held by a number of tanneries.
The effect of the high raw material prices can already be seen. Many Chinese tanneries are running at only 60%-70% capacity with company owners cutting production owing to insufficient margins. Looking at the shops after the summer break, there are a lot of substitutes for leather in furniture. Ladies’ boots are down and reach only the ankle, having been over the knee for the last few seasons. Boys’ and men’s shoes are using more and more PU materials for the winter season. A lot is still compensated by global growth, in particular in the emerging markets with China in the lead, but things start to get a bit more uncertain as far as consumer consumption is concerned going into 2012.
So far the consumer remains unimpressed by the ongoing problems in the financial markets, but the situation remains uncertain. Automotive producers are totally optimistic about sales and the outlook for 2012 is as bright as the situation today for them. On the other hand, one can see decent promotions and discounts again in the market. Anyway, time will tell and for the moment the market has been put on hold in its decline. Sellers will have to try to squeeze more money out of their customers and that will be hard work.
Sales this week were rather quiet. Bits and pieces in Asia and with the weak euro on Monday and Tuesday some bids could have been taken. Still steady demand for dairy cows, while males are more difficult unless they are salted and not over 40 kilos. Heavier bulls are still moving with high production levels in automotive tanneries. However, with the better kill supplies are easily covered and there is no shortage in the system any more. Due to the rise in prices at the abattoirs sellers had to be pretty stiff in their opinions regarding prices and most types sold at unchanged levels. Cows took full benefit from the currency market and made steady or fractionally higher returns at the beginning of the week.
The kill: The kill has been good this week. Butchers mention export beef sales which have allowed them to increase slaughter. Slaughter and hide weights haven’t gone up yet. Most butchers expect also in the weeks to come the higher seasonal slaughter numbers with beef exports and also domestic demand being decent.
What we expect: The next week will have the Asian market fully back on stage and we shall see what their response to higher asking levels will be. In Europe it will be hard fighting to compensate for the higher price levels at the abattoirs. It seems to us, that this will be a tough job without further support from the currency side. Cows and heavy bulls are presently reasonably supported, but the market headwinds continue to blow cold and strong.
| 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 | € 2,10 |
Steady
|
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.80 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.80 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.65 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.50 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.00 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,80 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.70 |
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 | € 1.30 |
Steady |
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