German Perspective—17.01.12
17/01/2012
We can’t avoid thinking that a number of large suppliers are trying to push the market higher for various reasons. The argument of reduced kill in various parts of the world is possibly encouraging them, as well as some tanners not carrying enough inventories at the moment. It seems to be a little bit short-sighted to push for higher levels now. There is no evidence that leather business has improved so much since mid-December that a sharp upward move could be justified at this stage. However, it seems that there are still stocks and contracts that need a home and consequently people are trying to make the most of the situation and lift the market higher.
To an extent this might have been successful, but a correction will be seen in February when most of the Asian buyers come back from the holiday for Chinese New Year. At this moment the big suppliers are playing the supply card and limiting offers to less than what normally should be available for sale. We find it interesting that neither official sales and export statistics nor the warehouses prove the story so far. Neither sales nor shipments actually confirm any shortage. In our view things are neither as bad as tanners tried to paint it in December nor as good as many are trying to describe it today.
The need of a certain replenishment, which we have experienced over the past week, has to be driven by sustained demand and higher leather prices to justify a higher price level for hides. Increased enquiries and the stop of the downward trend is good news. Pushing prices significantly higher might not only be counter-productive, but could bring about similar problems to those we saw a year ago.
Tanners are willing to pay a fraction more, which is good, but have resisted ambitious price-rises so far. This is good too, because tanners would lose the same amount of money with higher raw material prices as they did three months ago.
Interest and sales this week were good at the beginning, but as the week progressed activity dried up. In the first half the currency helped again a bit on revenues, but the positive effect faded towards the end of the week. Cows were in the focus of the interest with bulls just seeing patchy interest here and there, with EU tanners even more timid than buyers in the Far East. Prices were steady to a fraction higher.
The kill: The kill has been a fraction better, but is still on the lower side of the normal range. The beef industry is still in a period of restructuring and politics are more important than business at the moment. We don’t expect any significant change other than a small increase in numbers next week.
What we expect: The general consensus between packers and many in the trade is that prices will move higher. We have limited faith and believe that we will rather see narrow fluctuations on the present levels and that higher prices will dry demand up. Currency and value-price adjustments will be more price-determining than anything else. We don’t expect a buying frenzy to support any major price rises at this stage, but will the packers believe that too?
| 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 | € 1.60 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.60 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.40 |
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 | € 1.75 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,70 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.50 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.20 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.20 |
Steady |
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