German Perspective - 17.09.13
17/09/2013
As a consequence the market remains two-fold. The high-quality heavy end remains strong with decent demand due to the promising reports from the premium automotive makers. The Frankfurth Motor Show, which took place in early September, was the platform for bosses to confirm their strong business so far this year, as well as a positive outlook for the remainder of 2013 and also 2014. Many new models were launched and expectations are running high. Any concerns about the business of the premium car brands were wiped away and hardly anyone has any concerns about sales and demand for quite some time ahead.
This keeps demand for top-quality bulls strong and wherever these are missing they are substituted with other options. Tanners are suffering from the high and ever-rising raw material prices and other options need at least to be taken into consideration. That does not yet touch the demand nor prices for heavy hides. Other high-quality hides are also still selling well, benefiting from the general positive trend for high-quality and luxury items.
For the remaining grades, it is still the same harsh wind blowing. Selling ‘normal’ hides in the international markets is still not easy, at least when people have certain price targets that need to be reached. We found it pretty disturbing, that after all the positive reports from the Shanghai Fair tanners were barely interested in hides this week and those who considered buying to be unavoidable were not shy of bidding well below asking levels.
This wouldn’t have been surprising for light bulls, which are presently out of the market price range anyway, but it hit the rather easy-sellers of the summer dairy cows too, even for low grades, which are certainly still in good demand. Buyers were not willing to pay steady prices. This resulted in hard negotiations all week and the moderate decline of the US dollar against the euro did not make the discussions any easier. The US dollar is pretty much range-trading, but there is no certainty that the ping-pong trading will go on forever. At the end we did not find any buyers in Asia hungry enough for hides to accept asking levels, and this left us with very few hides sold this week. We did not consider the little flurry of the past weeks as a sign of better times, and so we think that a week after a show is not yet a sign for the worse. However, we are entering the next holiday season in Asia and one cannot get the impression that tanners are really under bought. And if they are, they certainly are not looking for expensive hides.
As far as the leather business is concerned not much has changed in a week. Most tanners are still trying to figure out what they have to expect from the next leather season. Although one doesn’t meet too many seriously worried customers, one doesn’t find many excited ones either. The only thing one can say for certain is that tanners are cautious and they have little intention of running into the same raw material price trouble again that they faced last season.
So, they are watching far more carefully than before how to manage the ever-lasting problem of how to match short-term raw material pricing with long with long-term leather price agreements. This attitude is not encouraging leather buyers either, because tanners have finally realised that large suppliers around the globe are not willing to let raw material prices fluctuate much on the downside. This may work or not, but it limits the cost-averaging potential of the ordinary buyer for the whole season and makes pricing and calculations more difficult than ever. Interest and sales this week were well below normal. With the low bids received and the falling US dollar it was hard to generate any serious business and the week ended with very few sales to Asia at barely steady prices. The little interest there was was just for dairy cows. The prices bid for other items were so low, that one cannot call it serious interest.
The kill: The kill continues to rise gradually. The good news is that the extra kill consists mainly of heavy bulls. This is not a surprise with the low slaughter in the second quarter and 6.5 % more animals in the feedlots. The trend should continue and as autumn progresses the more the number should rise until November.
What we expect: We think that we may still have a few weeks to go before the final showdown when we will know where the market will move for the rest of the year. Price relations between the main supply sources do not reflect the real value of hide grades any more and this needs to be adjusted. In addition the leather orders and prices for the winter semester will have to be fixed. We sense an underlying risk of a surplus situation in the coming months, but we have also learned this year that packers are not willing to answer that with lower prices. But one cannot escape from the market realities for ever and for the moment we continue to note a large enough downturn in demand to believe that price levels can hold into the last quarter.
German Perspective
| 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 | € 2,50 |
Weakening |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,20 |
Weakening |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,20 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 2,10 |
Weakening |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,85 |
Weakening |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,30 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,35 |
Weaker |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,10 |
Firmish |
|
| 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 | € 1,70 |
Steady |
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