German Perspective—15.01.13
15/01/2013
Despite all the concerns and fears that the market could overreact again, sellers are still playing the supply card and taking lower seasonal kills as the argument to push asking prices higher again. As the week progressed, this dominated the market more and more and by Friday buyers surrendered and paid more money. In the case of EU hides and sales to Asia, it did not help much because the sudden rise in the value of the euro on Thursday melted away whatever price increases were obtained in US dollars. So, in terms of net revenues we ended the week where we started it although everyone is just talking about higher prices and a firm market.
European tanners have been mainly just watching although some people are saying that Italian tanners were chasing hides. It is not unusual after the holidays for agents and tanners to ask around for offers and quotes, which is not necessarily demand or purchasing activity, but is frequently interpreted as such by ambitious sellers. By mid-week many sellers had become pretty optimistic and saw the market as firm, believing in higher prices. This generally creates difficult market conditions. On one side, sellers offer less. On the other the number of buyers declines with only those who still have desperate needs buying. This, combined with the lower seasonal kill, led to reasonable volumes of trading despite all the talk and excitement.
From our point of view, it’s important to look at what people are really buying. In Europe the interest is only for better-quality hides. It is again the heavy, high-quality males and the high-quality veals that are drawing most of the attention and account for the majority of interest. The rest has to be placed into the Asian markets. There was interest from China, as there is every week, but the sharp correction in the value of the US dollar from Thursday afternoon melted any kind of steady or even moderately higher bids in dollars down to steady or even lower levels in euro than we experienced over the Christmas Season. To maintain steady levels, offers this coming week will have to be another $1-$2 higher to secure the revenues.
A lot of the market optimism came from the initial 2012 reports of the three German premium car manufacturers. Their overseas sales were substantially up and with their forecast of further growth in 2013 it did not need a genius to make abattoirs believe that the prices in 2013 will go higher than even those of 2012. Their calculation remains simple. More demand combined with less supply mixed with some fear and competition equals higher prices. So, why not start it straight away in January? Automotive tanners will love that after they had finally succeeded in the last quarter of 2012 to bring prices back a bit. Again, the strong demand is just for the top end of the selection. But more money will not produce more hides of premium selection.
Sales during the week were limited. Partially because the offer lists seemed not to be too large from the start and possibly also because the number of tanners around the globe still in the market at the present levels has diminished as well. Prices rose a little in Asia at the beginning of the week and tanners were willing to pay $1 more than in December. That looked good when the dollar was around the $1.30 mark compared to the euro, but became far less attractive at the end of the week when the dollar finished at levels over $1.33. So, we ended where we started. EU tanners will have to decide next week how they are going to deal with the market in the first round of price negotiations of 2013.
The kill: The kill was pretty normal for the first full week of the new year. Numbers are not really special, as usual after the Christmas Season, but also not as low as many claim the kill is. Weights are lower than what we would expect for this time of the year. There is no reason why the situation should change this coming week.
What we expect: This coming week will be interesting. Offers will certainly come out higher and we are curious to understand how Chinese tanners will act in the remaining weeks until their Chinese New Year break (around February 10). Will they follow and support the higher levels or give up and stay out? With the domestic Chinese market being the driving force behind the demand, it might also give us a clue about expectations into the first half of 2013. So, asking prices will go up in the coming week and we are interested to see what tanners decide.
| 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 | € 2,30 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2.00 |
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 |
€ 1.65 |
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 | € 1.40 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.40 |
Steady |
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