German Perspective - 03.07.12
03/07/2012
Although interest this week was actually not too bad, prices are still under pressure with the only exception being hides that are related to the automotive industry. The other segments remain unmoved by the positive news and tanners feel comfortable in bidding prices down. What this demonstrates is the conflict the market has been dealing with for a long time now. There is not, and has never been, a lack of interest in raw material, but for the vast majority of leather products the buyers feel that the material price is just too high. So far, this has been absorbed by the margins of the tanning industry, but with the change of the seasons tanners seem to be far less willing to continue to do so. Hide price levels have already reacted to a minor extent, but so far we are still quite a bit away from the levels the industry considers to be workable. Beef producers, on the other side of the coin, see their problems of margins and the reduced beef production in many origins and feel consequently totally entitled to insist on their valuation levels for their by-product.
While the market for male hides still enjoys a lot of support from the rising demand of the automotive manufacturers, other market segments are feeling the pain increasingly week by week. With the change of the seasons and the summer break we have in the past weeks experienced for the first time since since 2011 a situation in which prices could come down. With reduced demand and some suppliers piling up stocks, pressure is building for some to move material before the long summer break and this was only possible with an adjustment in prices. The famous 5%-10%, which we have been mentioning for some time now, happened (at least for dairy cows). There were more confirmed rumours about package sales at reduced levels. However, we still like to point out that we would not be surprised if these deals were for non-regular materials and could be questionable as far as quality and weights are concerned.
We mention this because for regular material there was still enough interest around at almost steady prices. The sensible hand in the currency market was also important for trading this week. We do not have the impression that this was the start of a weak market yet. It rather gave the impression that some of the hides which had already been hanging around the market for quite some time needed to be moved and set the price track for the rest. The only exception remains the top-quality and heavy raw material where seasonal production is low and interest continues to be absolutely stable.
This week very few of the fundamentals of the market have changed. Quality and weight are still selling at steady levels and these need to be paid for by tanners. For less valuable material it seems that some stock haw been accumulated and needed to be cleared, so it went at a price close to its real value. Trading activity in general this week was much better than we expected in the first half, while the second half of the week became as difficult as it has been before and the strong recovery of the euro did not help. However, we don’t want to complain because product is still moving and customers are still opening their letter of credits on time. Sales during the week were mostly done at steady-to-slightly-lower levels and interest was available across the board with the only exception being lighter-weight bulls, which are still difficult to sell at the levels one has to pay at the slaughterhouses.
The kill: There is very little one can say at this time of the year about the cattle slaughter, except that it is very low. We are now arriving at the peak holiday season and this means that we still have to live with the low numbers for some more weeks.
What we expect: In a way it seems that we are at a breaking point in the market. Average-quality hide prices have still not adjusted enough and with the special sales of the past weeks, tanners feel now that they might have their chance. It is likely that bidding will become even more aggressive in the weeks to come even though it still seems that the industry in general hasn’t enough stocks to play it hard for some weeks in a row. So, we assume that, with the exception of heavy weights, the pressure on prices will persist and moderate slides can’t be excluded in the weeks to come. This will be pretty interesting, because there is still a question mark about unsold stocks.
| 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 |
€ 1.90 |
Softer |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.55 |
Soft |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.50 |
Soft |
|
| 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 | € 1.90 |
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 |
Soft |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.40 |
Steady |
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