German Perspective - 15.05.12
15/05/2012
Supply side prices are also assisted by larger tanners securing margins (small though they might be), meaning they don’t want to see lower raw material prices at this point so as not to endanger their existing contracts and force new negotiations, which will be due sooner or later. However, the game is starting to become more complicated. We are entering the low production season. At this stage we have to make a serious distinction between the reasonably balanced higher quality, fresh hide supply arrangements and the general market conditions, which are driven by the situation in the global markets.
The first is still in reasonable balance, and kill projections and production plans suggest there will be no serious imbalance in supply and demand in the high-end shoe and automotive markets, but the situation in the medium and lower-end and upholstery markets is different, and in our opinion much worse.
News about the continuing customs investigations and the bankruptcy of a larger tanner in Zhejiang Province in China has done little to generate additional confidence. At the same time, general news from the global economy is not as promising as many would like to believe.This leaves unanswered questions about how the market should be valued at the moment, by the good news and the stable situation for fresh bull hides or by the bad news and the mounting pressure for other categories? Or would it be best to look at everything separately? It seems an individual market analysis not very popular anymore. Most people are just shrugging their shoulders and calling the market steady. This is easy, popular and has been right for a long time and so hardly anyone is bothering about other options. It just seems to be comfortable.
Looking at the prices reported, one could get the impression that the market is indeed steady. However, it remains unclear whether all hides are being sold and if trading and shipping volumes are enough to reflect these levels. As long as suppliers are not forced to lower prices and there are still buyers around who will buy at the asking price, we will continue to see this. However, it would be naive to believe that this can just continue for ever; consequently it has yet to be decided which way the whole market is going to move, or if we will see more segmentation in the different market sectors. While one can easily justify the price levels of higher quality and specific raw materials owing to the added value they obtain in the final products they are used for, medium and lower quality hides will find it extremely difficult to obtain the same justification.
All this depends on the general trend in consumer sales. For our market that means that it might be easy to hold the prices up for the premium hides like calf, heavy and quality males, but for the rest of the article range it might become increasingly difficult to travel in the shelter of quality and the supply story could show cracks eventually.
Trading this week was pretty subdued. There are always sales, which the optimists use to justify a steady market, but which the realists see simply as some types (cows) not generating the volume one would need to feel comfortable. The weaker euro helped to balance lower bids and returns were just about steady for a limited volume. Resistance is growing and demand fading from Asia at the moment and for the moment tanners do not show much expectation of change.
The kill: The kill is just seasonal at the moment, pretty low and no change in sight. Falling milk prices might attract some farmers to reduce the number of cows again.Weights continue on their seasonal decline.
What we expect: Is it time already for a change? Well, then the next question would be who is going to trigger the change? In the better and heavier end the beef industry will still defend their positions. For the rest we see the negative impacts growing. The financial problems are rising, price pressure starts to mount. Tanners will become more ambitious in their price ideas and certainly more aggressively testing the market on the downside. With fewer buyers displaying a real need-to -buy situation they can actually now test the market. Since nobody has a serious interest in sharp declines the test might head for moderate slides into the summer, but it will not be easy to convince the packers.
| 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 | € 1.75 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2.00 |
Softer |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.70 |
Pressure |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.60 |
Pressure |
|
| 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 | € 2.05 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.90 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.40 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.40 |
Steady |
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