German Perspective - 09.10.12
09/10/2012
As a European one looks with great interest at the daily and weekly overseas reports that continue to express great confidence and good sales. From our perspective it is difficult to understand, and has been for weeks, why all the good things happen somewhere else. In our part of the world the news is now hitting some of the endless optimism of packers and some hide suppliers. Even the premium car makers have to admit that their sales and productions are also facing problems and the production of several models is being cut in the last quarter. There are already enough unsold cars around to mean they need not produce more for now.
The consumer product fairs that have taken place so far delivered mixed results, but the majority of producers are pretty concerned about sales and production. Some fairs for upholstery still have to take place and we certainly need to wait for meetings in Bologna to get a clear picture of demand. Meantime some suppliers have already drawn their conclusions and they are not positive.
From various markets in Europe one understands that suppliers are willing to discuss prices even before they travel to Bologna this week. Always a clear sign that market confidence is fading. Interesting, too, that one gets an increasing number of unsolicited offers from many parts of the continent where people were always claiming that they were very well sold and hides were in short supply. Well, it might still be a bit too early to call this market now oversupplied and weak, but the mood and the general opinion has certainly changed by quite a bit.
In particular automotive tanners are starting to flex their muscles. They had been complaining about prices for a long time, but demand dictated the purchasing volumes and they couldn’t let many hides go in 2012, so far. It seems that they are now finally beginning to have the courage to use the word ‘no’ again in their negotiations and ‘less’ in their delivery programmes, which has come as a surprise for those who were not prepared for it. We do not see things as being too serious yet, but the general balance of supply and demand in some of the market segments has certainly changed and with an increasing kill in the last quarter, people’s heels seem less firmly dug in than they did throughout the spring and summer.
The impressions people take home from Bologna are going to be important; not just the thoughts of the buyers and tanners, but also the gossip between exhibitors, colleagues and visitors. It doesn’t seem that the fundamentals have changed so much, but the sentiment has, and what people did not want to see (inflated prices and no profitability) has begun to change. If this is because of wisdom or just the result of insufficient sales we are not competent enough to judge. However, we all know how sensitive the market is and how quickly the mood can change again.
Trading during the week was only possible at prices that were steady at best. Any attempt at higher levels was quickly turned down and the recovery of the euro during the week did not help either. Consequently, the returns in euro during the week were at best steady, but in most cases a bit less then in the previous week. Sales were, if at all possible, made into Asia and in the majority for shoe leather buyers. European buyer were in the majority absent except those who had to renew their regular fresh hide programmes. It was interesting once again to see Germany on the buyers’ list for US hides. Of the few tanners left in the country, some are certainly replacing EU hides and consequently reducing demand too by a little. We believe that the sales that took place fell short of cleaning up what people wanted to sell.
The kill: The kill was cut by the holiday in midweek. Beef consumption remains below what butchers would like and expect. Temperatures have been reasonable and from the farmer’s point of view there is little incentive to sell cattle yet, or for butchers to buy any more at the present price levels. However, the kill in the coming weeks will be at least steady if not a fraction higher.
What we expect: Next week will be another week of showdown. Many people will meet in Bologna and it remains to be seen how even the most stubborn supporters of a firm market will rate the situation. We think it will need a very positive result from the show to protect the market from the downward pressure we have been sensing for a while. Sellers will go to the show with steady asking prices; let us see how they are by the end of the exhibition.
| 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 |
Weakish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2.00 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.85 |
Weakish |
|
| 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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