German Perspective - 05.11.13
05/11/2013
Anyway, for exporters the sudden turnaround came at a good time; over the week three cents were just wiped away. This only took us half-way back to August levels, but it was better than nothing. Export prices in US dollars to Asia were hardly moving at all and so the currency movement offered a helping hand for calculations for sales on Thursday and Friday.
In general the week was pretty uneventful. There was no great volume of interest and every sale was hard work. The strong performance of the US market should make our lives much easier, but it actually doesn’t. The business remains dominated by the large players in footwear, automotive and luxury where standards, uniformity and volume apply and the hides that qualify are snapped up, obtaining better prices than their real values and becoming hardly available for smaller and less streamlined productions.
The beef industry tries to value all hides according to the benchmarks of these ‘bestsellers’ and finds it extremely difficult to understand why the remaining customers outside the battlefield of the ‘majors’ have a totally different valuation of the available material. With the regular product being well sold and asking prices being out of reach, smaller operators are now starting to do again what they did in spring when hides prices became too high: they are searching for cheaper material that is still of acceptable quality. This means that heifers and cows should in the first instance substitute for steers and bulls. This is mainly done by smaller, more flexible tanners mainly in China who are producing for the local market. This explains why a number of domestic Chinese hides are desperately sought after and prices for economic local material are soaring.
In the end this means that those who were not part of the big-deal contracts in late summer have no access to standard products any more, or they have to pay inflated levels that do not allow them to make any profit (if they can find the hides). The alternatives offered are either not suitable or far too expensive. This is still not solving the fundamental problems of finance and profitability and what worries us much more is that from many tanning centres one hears more and more stories about leather orders suddenly dropping in the past weeks. How much truth there is in this we don’t really know, but the sources are pretty reliable.
Another interesting fact is that the sheep and lambskin business for standard nappa seems to be struggling too and there has been hardly any shift of bovine leather demand into ovine, although the price for hides and bovine leathers are at record levels. This leads us to draw the conclusion that a lot of issues in the trade are pretty much out of balance and order. Imbalances cannot last for ever and it will be pretty interesting to see what the next step in the market development is.
For this past week we saw very cautious activities. Only low grades found plenty of interest and this is only because of price and the search for cheaper alternatives. Prices were able to advance by a few percentage points. Heavy bulls for the automotive industry are under discussion; perhaps there is a chance of a correction in price owing to the higher kill, but in the end buyers still see supply security as a priority over tough negotiations and attempts to buy cheaper. Dairy cows have found interest but we understand that Italian buyers were pretty clear about lower prices while the interest from Asia got stuck at the levels of last week. Lighter-weight bulls remain a problem, with their prices far above what the market can support. Sales were okay, but far from being enthusiastic. It still remains a problem that one can sell all the regular hides in cows, heavy bulls and low grades, while the rest attract no buyers at all. Prices were steady, taking an average from sales early and late in the week.
The kill: The kill still remains pretty solid, not to say high. The question is for how long. Many expect the kill to drop soon while others believe that there is enough cattle around waiting for slaughter. It seems to us that the numbers will remain pretty good well into Christmas.
What we expect: We know about all the positive predictions and expectations. However, we still believe that the market will run itself into a vicious circle again. With hide prices too high and margins too low, there is a need for lower raw material prices, but there is also a fear they could come down suddenly and threaten existing leather contracts. The substitution of leather in many sectors is making more and more people dizzy and the market, more than ever before, seems just a playground of interests. For the moment the currency situation is helping and will, we hope, continue to do so.
| 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 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,20 |
Steady |
|
|
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 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,85 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,30 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,35 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,20 |
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 | € 1,70 |
Steady |
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