German Perspective - 28.05.13
28/05/2013
Official reports and prices are camouflaged for the sake of protecting the market and contracts, and total trading activity is far lower than it should be. Europe is preparing for the summer break and Asia is in the low season before the activity might pick up again in July or August. The general global economy is confusing and between the drama in southern Europe and the growth in other regions, the situation in the US, Japan and northern Europe is still fragile. In China one hears also conflicting news, but the growth and the economic situation is certainly not free from problems and the new leaders are sensibly trying to manage the economy to keep it on track for the sake of a stable country and society.
What is repeating itself on the hide market is the strong performance of the luxury sector. The wealthy are still willing to please themselves with fashion and accessories, while on the other side the ordinary people are counting their money and see other products as more more important to spend on instead. For mass consumption, price is still the main factor and that makes it difficult to justify the high raw material prices we have seen so far in 2013.
Excellent split returns, advanced finishing technologies and adjusted product designs have helped the calculations, but not solved the problem. Raw material prices and leather prices for the standard articles do not match. Overseas markets have started a certain correction already and prices are sliding.
European slaughterhouses are still not willing to admit that their hides could be overvalued, just watching the premium and heavy hides and transferring this to their entire production. As a consequence the gap between market value and price of the average quality hides continues to widen and tensions are increasing again.
Business activity this week was pretty quiet. Asian tanners are seeing the market slide and they have never been smart buyers in a market that is showing falling prices. So, many of them have decided to stay on the sidelines and wait. It seems that most of them are still covered for some time, which allows them to see no urgency to act yet.
In Europe one can still see a few loopholes and tanners are certainly far less covered for raw material. So, there is limited, but regular demand for quick-delivery hides. The weather is cold and wet and stocks are not building rapidly in raw material warehouses, keeping most suppliers still relaxed. With the frenzy in the buying market, nobody has the courage to lower asking prices yet. A few loads here and there close to market levels prevents the market from being officially in decline. We believe that prices in vicinity to the asking levels can only be achieved in Europe, while for sales in Asia large price concessions need to be made.
Interest this past week was again for heavy bulls, low grades and some for dairy cows. While bulls and low grades go for the prices asked, dairy cows are under pressure with bids $3 to $4 below the trading levels of some weeks ago. Buyers were not really ready to adjust their ideas by much so very little of the interest could be converted into sales. Prices for dairy cows were sliding by roughly a couple of dollars or one had to keep the hides. The currency rates did not help much either, which made last week one fitting for the weather.
The kill: Despite all the negative news about beef, demand was the kill pretty steady. Nothing brilliant, but also nothing to worry for the time of the year either, except the one day missing due to the holiday on Monday. Hide weights have started to fall although the cold and wet weather is still keeping a lot of cattle away from the fields.
What we expect: More ‘Groundhog Day’. The market hasn’t sorted itself out. The valuations of the various grades are not in line with prices and the necessary adjustments are getting more overdue week by week. However, without somebody blinking or being forced to act there is little indication of anything more than a minor reduction in prices. The next abattoir buying will tell us what to think about the prices.
| 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 |
Pressure |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2.30 |
Pressure |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 2.00 |
Pressure |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.90 |
Pressure |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.40 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2.30 |
Pressure |
|
| 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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