German Perspective - 25.06.13
25/06/2013
Although demand has definitely declined and the volume of interest can hardly cover even reduced supply, sellers continue to sit the market out and base their confidence on the patchy sales that can still be generated every week. Indeed, there are still enough buyers around who need to continue their hand-to-mouth attitude and have little option other than to buy the lowest volume they can to keep their productions running and their orders fulfilled, not to mention the use of the limited cash-flow resources some have.
The small volumes sold are taken as the market reference and since they fetch close to asking prices they confirm the resistance of many sellers and the view that they can still defend their price levels. We all know that a market only moves seriously when the balance of supply and demand is in serious disorder. This is not yet the case in Europe and except for some speculators, most raw material warehouses are still pretty empty and are not yet creating a problem for the owners.
Overseas the situation may be a bit different with many talking about decent stocks of wet blue material at origin, but also in importers’ and traders’ hands. As long as these people are not getting nervous they will not become a threat to the market. Questions remain about the second half of the year and Asian producers are already starting to prepare for a busier season.
Global leather demand seems to be behind the levels of 2012 and the outlook for the second half of 2013 isn’t showing a serious change. Possibly the market stars, automotive and luxury goods, may generate some growth, but since they do not account for the majority of leather production, the impact will only be on premium raw material. For the majority of leather production, the outlook is less exciting. Most producers are not yet willing to adjust their forecasts, but optimism about growth in retail sales is fading. The number of tanners expecting higher orders for the rest of this year than they received in the second half of 2012 is shrinking.
Last but not least, the money issue also remains a factor. Interest rates may continue to rise because of an end to the continuous flood of liquidity that has been poured into the market to combat the debt crisis since 2008. Even the expectation that money could become more expensive could be enough to turn commodity markets around.
For now we have to deal with the summer break and most tanners are beginning to think about their holidays. At present prices, there are not many willing to commit to inventory to start after the break and the majority think they can easily wait until the very last moment and not pay more than they have paid before. Most want to know first what their leather buyers have to say before they decide. This is not easy, because in Europe the real picture traditionally emerges only towards the end of September, while Asian tanners have to decide a little earlier.
Trading this week was pretty light again. There is a sale here and there, but no widespread interest. Quantities were also low and the volumes of the bids are far away from what they are normally. Most of the interest was for low grades and ox-heifers. The cow market cannot really sort itself out at the moment. The US dollar gained a little towards the end of the week, which was a bit of relief, but prices all over can only be called steady at best. North German hides are not the most attractive at the moment and with the general caution around they are not the ones topping the priority list.
The kill: The kill and weights are presently at seasonal lows. Farmers are happy to have the animals out in the fields and although cattle prices are high they are in no rush to sell. Beef sales are not too good either and so packers are not desperate, although they would like to see their plants running full. We are now approaching the holiday season and so there are no changes in sight.
What we expect: As long as sellers feel no need to stimulate demand by more defensive pricing, the market will just do what it has done for a while. Nothing. However, the longer nothing happens the sooner something will happen, but it does not seem that this is due this week.
| 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 |
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 |
Share this story:
