German Perspective - 12.06.12
12/06/2012
The hide market remained relatively unmoved by the situation. Packers are still playing the supply card and in the case of heavy male material, they have the situation on their side. Despite complaints from automotive tanners and the upcoming holidays, supply is hardly covering the requirements for fresh shipments to keep the drums running. The market for this material remains pretty competitive and packers can still profit from the situation. They continue to believe, however, that this translates to the rest of the market, which they have been successful in doing over previous months, but resistance to this continues to grow now.
The trade has still not had the courage to signal a clear stop to prices at the abattoir door, which would get prices back into balance. This is not just a German problem, but one that applies almost everywhere around the globe. We are hearing about more and more payment issues. If it is not delayed payments, it is more and more tanners admitting that they can only hold sales and turnovers up by extending credit terms with existing customers or by winning new ones by offering special terms. Those who have been in this business long enough will remember the times in history when this policy has had a pretty bad outcome.
Actually this time it is a bad combination of customers not having access to enough finance due to trouble with the banks and there not being enough sales before the summer; there is activity and product flow without any serious business basis. This situation does not only apply to Europe but also to China and in particular to small and medium-size operators.
Another interesting question is if the collapse of the lamb and sheepskin market will have an effect on the leather business in the coming seasons. We would not be surprised to see handbag, some women’s shoes and garment shifting from bovine leather to skins in view of the large price gap now created after the massive fall in skins prices, which may not even be finished yet. This might hit calf, kips and cows more then the rest of the market. There is worrying news that even calfskin tanners, who had mostly been enjoying strong business in 2011 and 2012 now have large inventories and are starting to become concerned about how to wind them down. Many are saying that raw material storage facilities are exhausted and cannot take any further product before the summer holidays.
In Europe the biggest problem is still in the upholstery sector and the situation is considered to be so poor at the medium and low end that many are actually raising the question of how many tanners will reopen after the summer holidays. Looking at all of the above, it is surprising how unmoved the hide market continues to be and how much courage sales people are showing in defending their price levels and their willingness to store what cannot be sold rather than to lower prices. However, having said this, we are also convinced that a lot of the sales numbers in the past weeks have been achieved by private deals at special prices.
Interest and business activity was again limited during the past week. Heavy males have been placed without too much resistance. Cows on the other hand were facing pretty aggressive bids and with the recovery of the euro they became even less attractive as much the week progressed. In the end the numbers sold were all right for the time of the year, but not really across the board and so there is still a certain imbalance between production and sales. Prices were again barely steady. While males were either steady or fractionally lower, the main pressure is still on dairy cows and lightweight males and prices were again eroding moderately. Revenues depended pretty much on the timing of decisions and the currency rates.
The kill: Although only the Catholic parts of the country were on holiday this Thursday (for Corpus Christi) the kill was pretty low. In particular, heavy males suffered from the weak performance of beef retail. Export of beef is negatively influenced by the poor economic situation in the countries hit by the debt crisis. At present there is very little light at the end of the tunnel and we don’t expect much recovery of slaughter in the coming weeks.
What we expect: We believe that the pressure on the market continues to build. We do not believe the claims of many sellers around the globe that they can move their production easily. What applies to some selected items cannot be considered to apply generally. This game can still be played as long as sellers are willing to hold what is left over and to wait for better times ahead. So one cannot actually say if and when the market will react. However, if our analysis is correct there will be a trigger that will make things move.
| 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 | € 1.70 |
Soft |
|
|
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 |
€ 1.65 |
Softer |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.60 |
Softer |
|
| 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 | € 1.80 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.35 |
Soft |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.40 |
Steady |
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