German Perspective - 02.04.13
02/04/2013
This leaves you with the simple situation, that you either think and do what 95% of the people consider to be right, or you have the courage to question at least part of the ‘facts’ the majority of the trade considers to be the market drivers. The number-one story is still supply, and sometimes it seems you have just to repeat the same issue often enough to make people believe it. Globally we have some variations, but no serious decline of bovine slaughter. Possibly it is less the slaughter and more the use of hides.
Could it be that we have more packers turning hides into wet blue and finished leather, and therefore offering fewer raw hides to the same tanning capacity as before? Could it be that the strong and specific demand for top selections means that in many tanneries, out of 100 hides tanned only 40 or 50 are finally used up in finished leather orders, which leaves many hides astray in the supply chain? Is it possible that industrial tanners are too streamlined and inflexible in their raw material sources as well as in the articles they produce and consequently have become an easy victim of the raw material market when supply is tightened in specific origins?
It seems that many are not even considering these options any more and just follow the story that fewer hides are available. In particular, Chinese tanners dependent on raw hides, calculating cheaper tanning costs and still enjoying high leather demand, are the first to be scared by supply. Possibly we are just shrinking the raw material offer, but increasing the wet blue and crust stocks along the supply chain. When in the old days raw material suppliers where the ones building up stock when the market started to face problems, they are possibly the last ones today to do so, with the exception of those producing wet blue too.
One thing is sure, the number of wet blue hides being offered in secret by tanners and packers around the globe is rising every week and the cash frozen in inventory is already torturing some. Consequently, we see a strange market alliance. Raw material suppliers, wet blue owners (packers and tanners) and tanners with sufficient stocks bought at the right price now need a stable and firm market to cash in on their positions or to protect the wet blue stocks they cannot move. The number of players involved in such an alliance represents a large portion of the market, so that very little can be done about it as long as everyone has the financial resources to stay in the game.
Consequently prices were pushed higher again during APLF in Hong Kong and those tanners who still had to cover raw material needs or had an interest in keeping the ball in play were forced to pay up. However, the number of buyers remaining in the game is declining. Every week there are fewer buyers, but rising prices.
This is not really a reflection of a sound situation. However, in the meantime meetings with regular customers in Hong Kong were friendly and despite all our concerns, our total sales during the show were satisfactory. The weaker euro helped calculations and helped to close the gap between the present prices at the abattoirs and revenues. Most of the interest was seen for cowhides and despite the high levels of US steers buyers were reluctant to follow the market for German bulls. Many tanners shifted their interest to cheaper origins, which has driven their prices up in the past days.
The kill: The kill this week wasn’t too bad again, but the holiday on Friday has reduced the total number of hides by quite a bit. The extraordinary long and cold winter this year has kept the cattle inside for much longer, but beef demand also a bit better. Packers are complaining about business and none of them is really happy. Next week will be shortened again and after Easter beef demand normally declines for some time.
What we expect: This coming week some of the trade will meet again in Bologna and the high-end will show their designs and ideas for the next seasons. The show will offer us more information about what European tanners think of the business and if articles are created to absorb the stocks of medium and low selections. Actually we don’t expect much influence on the raw material market and prices should not move.
| 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 | € 2,40 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2.20 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 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 |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.90 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.40 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2.10 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.90 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.60 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.60 |
Steady |
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