German Perspective - 30.04.13
30/04/2013
Overseas origins are already seeing a moderate decline in prices and one has to wonder if far larger price concessions have already been made to achieve the sales reported and the volumes talked about. The market in Europe normally need a bit more time to react, and with suppliers still being well sold, their concern is more about the weeks to come and the abattoir buying in the future than a serious price discussion from one week to the next. We have again to leave the high-end hides and prices aside. For the rest of the market however, one can see already the first breaks in the price lines. Not that we see prices already sharply falling, but the higher asking prices week by week or month by month, which had been achieved, cannot be realised any more. Many suppliers have decided to accept steady money and not wait for better prices any more. Another factor is money and cash flow. The choice between a few cents more and safe money is shifting more and more towards the safe money option.
Looking at the market activity this week it was pretty obvious that the pipeline is better filled week by week. Only the high end and the fresh hide programme businesses are still active, while most other tanneries are more and more disappearing from the scene. We all know, that prices had gone too high, too fast for the majority of the hide grades and the necessary time for adjustment and reflection in the leather market was not given. This happens sometimes in the raw material markets and was mainly the result of a dynamic that was triggered from the luxury and automotive segments and amplified by the positive mood of Chinese consumers and industry.
Low interest rates and a general positive mood for limited agricultural commodities stimulated traders and investors to invest in hides and skins. This built up the stocks along the pipeline starting from wet blue. With the main leather season ending now and stiff resistance against further increases in leather prices, the market is getting tired and one wonders how this is going to end in the slow season of leather production. If we look at the outstanding contracts to be shipped and the inventories reported, one has to have the impression that the raw material inventories in Asia will last for quite some time yet and could keep the buyers out of the market for some time. The protection is that the majority of players are not at all interested in any sharp market correction at the moment.
Trading this week was a bit of mixed emotions. Sales in total were still acceptable, but this should not camouflage that the number of sales was just inflated by a number of regular and repeating programmes in Europe. Sales on the ‘free’ markets were pretty limited and only in very small numbers. There was not a single male hide sold overseas and all we were able to place were some extra heavy cows. The exact opposite was true in Europe where only heavy males found takers and no females sparked any interest. Prices obtained were just about steady, thanks to the assistance of long-term clients who were willing to admit that long-term relations have a price sometimes. However, customers made it clear what they expect in the next round of negotiations in the near future. The total volume of sales was however limited and only the lower kill due to the holidays in May made them sufficient.
The kill: Although most people are complaining, we have to admit that the numbers in our region are not so bad. Weights are actually starting to decline, which is early. At the end of April weights are normally at their heaviest for the year. The month of May will be interrupted almost every week by holidays, so the numbers will be low.
What we expect: We remain on the cautious side and think that the market will remain in correction mood. In Europe it might still need a week or two until prices really react. This may exclude the extra heavy premium material, but for the rest the correction will have to follow the other markets. We still think, that a rough 10% is actually what is in the pipeline.
| 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 | € 2.20 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2.00 |
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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