German Perspective - 14.08.12 - leatherbiz: Lea Leatherbiz

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German Perspective - 14.08.12

14/08/2012
What happened this week: Most of the trade in Europe is still on holiday, and with little local trading activity we have time for some other issues. The big bang came early in the week when information and official government letters started circulating in the trade suggesting that China has imposed an import ban on German hides. There had been rumours of problems, but a ban was never discussed. It took almost three days to figure out that what we are dealing with is a change in policy with regard to import licenses. The fact is that the central Chinese authorities have for the moment decided not to issue any new import licenses. This change came into effect at the end of July, although all  licenses issued before remain valid. This was a great relief for those who have customers with regular business and existing licenses for pending shipments, outstanding contracts and goods afloat. This should allow enough time to negotiate with the Chinese government and to see what the real reasons for this action are and what solutions exist. It seems that hides of questionable origin, quality and levels of preservation have been arriving in Chinese ports covered by German documents. This has caught the attention of customs officers, triggering the kind of action we have seen this kind of action. We will see how this issue develops and how bi-lateral negotiations solve the problem in the long term. For the moment the situation has calmed down and the chaos and stress dwindled as the week ended.

Packers and some sellers are still pretty optimistic about the market, but we think one has to be cautious still. With all the hurrahs about commodity prices and in particular agricultural-related ones one should not overlook the hard facts. China’s exports are slowing down and the domestic retail market is not really that good. Money is tight, and not only in Europe. With all the money pumped into the markets, it hasn’t arrived at production levels in many industries. At least not for small and medium-size companies. The squeezed margins of tanneries are not making them inclined to finance inflated levels of raw material prices. It will not need much to cause serious trouble with payments. So far, some letters of credit are coming in more slowly and in Europe suppliers are waiting with some fear for invoices to become due after the summer holidays. Cash flow in the pipeline is not as regular and smooth as one would wish at the moment. The rest is connected to holidays and people either relaxing or starting to prepare budgets for next season and rest of the year. What those figures look like will be known later in September when numbers are going to influence the decisions. In the meantime trading is limited to some Asian clients who continue to sniff around and grab whatever interesting offers they can find. Some who either need hides or are buying them in expectation know that low bids will not attract sellers and if you have decided to buy you have to pay what is asked or pretty close to it. So, most deals today are a direct reflection of individual expectations for the market in the coming months. Interest was again a bit across the board; from cows to bulls, everything was represented, but volumes were low. Prices were more or less steady depending again on currency rates.

The kill:  With the school holidays coming to an end in the North the kill has improved a little. Since the weather is also not too hot it is helping beef consumption a little. Exports are said to be pretty slow. There is a chance that the numbers will rise moderately in the coming weeks. However a stronger rise can only be expected when September comes.

What we expect: There seems hardly any reason why suddenly in the next week the market should move in any direction. There is still no trigger or reason for sellers to ask more money or for buyers to believe in sharply falling prices in the weeks to come. The All China Leather Exhibition in Shanghai (September 4-6) seems to be the next target for the trade to develop an understanding of what might happen next. So, we continue to believe in our policy to keep risks low and to watch carefully for the next market move and for a clear indication of demand after the holidays.
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

€ 2.00

Steady
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1.75

Steady
 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1.55

Steady
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2.15
 Steady
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1.95
 Steady
  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
 Steady
Thirds bulls 30/+      kg 38,0/40,0 kg 24/+   kg 33/36 kg € 1.40
 Steady





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