German Perspective - 06.11.12
06/11/2012
The large figure of export sales from the US has again confirmed that the tanning industry in Asia must have leather orders in hand or on the horizon, which is forcing tanners to replenish their warehouses. Normally news about a weaker EU market would have moved the Asian tanners to the sidelines to see if they could get raw material prices down in their preferred origins. The sales figures show that, at least in the past weeks, tanners have preferred to buy rather than wait.
Although our market here is still under pressure, at least as far as the males are concerned, one has also to consider that many other markets are still holding their levels pretty well, mainly on the back of forward sales. This raises a question: is the weakness of the German market a trendsetter or just a result of the specific situation in the automotive sector and the production cuts in various European plants?
Automotive production is slow in various other markets too, but it is not so much the number of cars as a question of how many leather-upholstered vehicles will be built in the coming months. One has also to realise that there is still no serious decline in sales of premium cars; we are just settling back from a boom period and inflated production plans are being re-adjusted to more normal levels. With the just-in-time deliveries starting from the slaughter industry, this creates the usual congestion in the supply chain for a while.
At present we have a bit of an awkward situation. Tanners want to buy more cheaply but have no interest in a serious market correction, which would endanger their leather contracts and prices. In the end they are quite happy with the recent correction in prices; another ten cents per kilo and their world would be almost perfect. The 10%-15% correction we have mentioned a number of times is not far away from today’s levels. However, markets have their own dynamic sometimes and as they were overshooting during the summer, they could also over-react now. The good news is that German hides have undergone the correction to make them globally competitive again and this has taken a tremendous risk out of the market.
The next step will most likely be determined by other key global markets, in North and South America and Oceania. If they hold then then German hides should be attractive enough to find sufficient overseas buyers for all items, even the problematic heavier ones that have become available from the reduced demand from automotive tanners.
Sales this past week have been focused on cows and heifers. The sharp rise in split prices has made the split return an important factor again. Prices for heavy cows and heifers have been steady and the stronger US dollar towards the end of the week helped to make deals possible. Interest for bulls was limited, with most potential buyers being off. It is going to be interesting to see how Asian tanners react to the offer prices this coming week for bulls and steers.
The kill: The kill this week normalised again. The levels are adequate for the time of the year, but the short-term rise in the kill of males was basically owed only to the Muslim festival of Eid al-Adha. Weights are rising and we understand from the beef industry that levels will stay the same for a while.
What we expect: Tanners will now fight hard for further price declines to balance as much as they can from the tough times over the summer. It’s not clear how many desperate sellers they will meet or how many buyers will be willing to enter the market. For the moment we see the market for females steady, and in the market for males, buyers should still have the upper hand on those who need to sell.
| 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 |
Weakish |
|
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 | € 2.10 |
Weakish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.90 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.70 |
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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