German Perspective - 02.07.13
02/07/2013
If there is a conclusion to draw, it could be that we finally have to accept that the global world of hide marketing has finished its period of transition and has become a different one. There is no active trading any more. It is no longer a daily or weekly challenge to gather information, to be quicker and better informed than competitors, to conquer new markets and customers or to discover new supplies and origins.
For tanners, it is no longer about the flexible use of raw material to develop new articles quickly, to become more efficient and flexible, to gain an advantage over their competition. All has become static theses days. With the rise of productions, with the growing size of those market players who want to control raw material supplies with budgets, there has been a change in dynamic. The flexibility and creativity of this business have faded and possibly even disappeared.
Large beef producers are trying to control prices and are enjoying some success. They have allies in some of the larger players on the buying side, companies that need to protect their own positions. The casualties are the tanners who have continued to believe in the regular fluctuation of prices due to demand and prices. We cannot camouflage the realities forever; it is now pretty difficult for tanners to manage acceptable average raw material price levels for their leather orders.
All of this would be less than critical if raw material prices had not been overshooting, or if leather prices had been less stagnant with leather demand declining towards the end of the season. This makes it extremely difficult to find a sensible economic start for next season, with high uncertainty as to how leather demand is going to develop for the last six month of the year.
Except for automotive and luxury leathergoods, products for which the price of leather has only a small leverage on the final price, it seems that price increases for leather have resulted in a decline in demand. Consequently the pipeline has begun to fill and in some cases even to become congested. Slowly the poker game between the beef and tanning industry is turning into a bet. On one side there is the position that leather demand will improve enough after the summer to absorb stocks and justify the price of raw material. But on the other side there is the hope that slower demand will eventually force sellers to move product and adjust prices to begin next season with a raw material price level that fits the leather markets.
In the meantime both sides are professionally managing a moderate (public) price situation, which is not harming those who have inventory. The wild card in the game has finally become the financial situation. Is there enough cash around to continue to play the game?
The problems of China’s banking system and the individual positions of several of the larger buyers have led to a slowdown of shipments and product flow. Positive exceptions such as high-quality material and calfskins are not the market standard.
Trading this week was again extremely quiet. Despite the firmer US dollar there was hardly any demand from Asia this week and tanners have shifted into a total wait-and-see position. Any counters on the few bids seen were answered by silence. Europe is going on holiday and except for the never-ending demand for premium quality, tanners seem to have decided to stay out of the market. Prices are not moving because nobody is adjusting them and everyone is watching and waiting for abattoir buying for July before taking any (new) decisions.
The kill: The kill remains at lower seasonal levels, but we have to admit that in our region the numbers are not as poor as one would expect for this time of the year. Cattle count in May has proved that the herd has not been de-stocked and the number of males has even increased compared to a year ago. Cold and rainy weather is supporting slaughter as well.
What we expect: The next two weeks will show us if there is potential for a change. Abattoir price negotiation and further information about the financial markets will offer more insight into what we can expect for the rest of the summer. We continue to believe that there is a serious need for a price adjustment for the standard grades to create a solid base for the market in time for the re-start after the summer and to be on safe ground again.
| 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 |
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