German perspective - 16.07.13
16/07/2013
How sensible the situation is at the moment could also be seen by the currency market in the past weeks. The USD was boosted by the interpretation of US Federal Reserve chairman Ben Bernanke’s comments about the future of the cheap money policy and was suddenly reversed by a new interpretation of statements this week. The weaker euro was shortlived and with the recovery of the euro or the decline of the USD, EU hides became less attractive again. They were too expensive, became a little less too expensive and are now again just too expensive.
Leather demand is not what is should be and the US numbers for export sales this week were pretty low. This leads to the question of reports. One has very few options today. Either the numbers or the reports are wrong. We are certainly not the masterminds behind the curtains, but one has the only option either to question the official figures or the reports about business and sales. For us, it is just the sellers policy of “in the end, everything will be fine”. The facts and the situation so far at the beginning of the third quarter however speak a different language.
If the tanning industry is really short of hides they would just buy more, more hides would be shipped and payments would come much faster to secure supply. For us it seems a bit more like: the hides coming now we don’t really need; they are too expensive and we need to have raw material prices down to reach a fair new average of raw material cost before we start the next season of production.
Suppliers still bet on the control of supply and believe they will be able to wait long enough to force tanners back into the market and make them paying asking levels. In the meantime, some preferred customers get some 'special deals' to move product without considering the same in the general weekly market picture. All the above does not apply to the market situation for the preferred raw materials which can neither be easily substituted nor suffer from any serious price competition from alternatives nor from the problems in the entire added value chain.
Premium automotive hides still remain in short supply and the decline in slaughter in the second quarter has extended the effects into the summer period and this could possibly last well into autumn when the kill should return to more sufficient levels. A similar scenario one can possibly detect for veal, but this is far more dependent on how high-street brands are going to perform in the second half of the year.
A lot will depend on the Chinese consumer and government. It is obvious that some industries will no longer get support from the government. This seems to apply to a larger part of the tanning industry and will most likely be handled via financing regulations. Many well-informed sources speak of rising problems of finance for import traders which are traditionally supplying the smaller tanning businesses, not to speak of pollution and cost issues.
Sales this week were very light again. Italy is buying for after the holidays, but in general standard EU hides are too expensive. Until abattoir prices correct, the reduced demand for raw material will be focused on more attractive origins.
The kill: In our part of the world we are presently in the lowest season of kills. Numbers and weights are hitting the bottom and this should continue for some weeks until the northern part of the country begins to return from the school holidays. The cattle count gives hope for a reasonable increase after the summer holidays.
What we expect: There is hardly any indication that there is yet a major change in sight. Not that it is not required, but it still needs a number of players to see it the same way and to act - not forgetting the butchers. In international markets we either need to see a major round of buying for August and September or a correction of prices to make EU hides a competitive option again. We can only hope that the leather demand doesn’t suffer too much.
| 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 | € n.q. |
|
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € n.q. |
||
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ n.q. |
|
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ n.q. |
|
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ n.q. |
||
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € n.q. |
|
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € n.q. |
||
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € n.q. |
||
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € n.q. |
|
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € n.q. |
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