German Perspective - 10.12.13
10/12/2013
Many players are already beginning to plan their break and suppliers are busy trying to figure out the prices that will have to paid at the abattoirs in December rather than bothering too much about sales. This might be a risky strategy, but most people continue to believe that supply is the important subject while demand is just a matter of patience. Well, this could eventually become a problem. With the exception of automotive leathers, all other segments are showing fatigue. Leather orders are definitely not what they should be at this time of the year and are falling well short in comparison to a year ago. This seems hardly to bother anyone, but we continue to keep an eye on it.
From the European perspective we face a declining USD, falling split credits, correcting prices for calf skins and a weak lamb and sheepskin market, pretty poor profitability and leather orders that are not making many tanners happy at the moment. In the good old days this was generally enough to raise concern, but with packers now setting the market and being supported by wet blue traders the market trends and settings have changed. It’s hard to make predictions now and the industry has to live with a lower market volatility. This is highly appreciated if the levels and trends are right. Time will tell.
In the meantime tanners overseas are taking the chance to see if pressure will build up on suppliers. The break in the western world and the reduced shipments due to the Chinese New Year holiday that follows are expected to build up some inventory in the hands of shippers, and tanners are quite happy to wait and see if this could change the minds of the suppliers. They are however betting on a declining kill in the first quarter, giving them confidence that what cannot be sold now will be sold easily in January or February. This is certainly a strategy, but a risky one too.
For the moment the majority of buyers are not in any desperate need of raw material and are playing their cards pretty cautiously. Tanners selling lime splits face for the first time in 2013 headwinds on prices and the savings good splits prices provided as compensation for raw material prices may fade now or even become another headwind. We will see in the next six or eight weeks if the market can break the levels we saw in the spring of 2013 or if we will see the same correction as we had in the summer. For Europeans, the currency has become another factor; the US dollar today is down 3%-5% in value compared to spring and summer. So, one should watch out.
Consequently there was not much trading or interest this past week. With moderate concessions on prices, a few sales of heifers and low grades were made, while there was no interest for cows at all. Some people claim to have had success with bids that were about $2 below asking prices, but we haven’t seen any of them. The automotive tanners are asking for price reductions, but if they don’t get them they still buy what is offered. The big news of the week is that German car manufacturers are even shortening their Christmas holidays, proving again how strong export demand is for premium cars. Having a look at the final results of the week, the tone is for various reason pretty bearish and we are very curious to see what sellers are going to decide regarding prices for the rest of the year.
The kill: The kill remains pretty strong, but there are clear indications that it will slow a lot by the middle of week 51, so the December totals will be reduced, missing almost one-and-a-half weeks of kill. Weights continue to come in very heavy and this should now remain the situation until the New Year.
What we expect: The change of the tone in the market that we sensed last week is becoming more pronounced this week. The island in the sun that heavy bulls represent is one thing, but the rest is diving into more resistance from all sides. Currency, holidays, demand for leather … there is nothing pointing to a better market in the weeks to come. For speculators, it may be the time for bargain hunting and for others to take shelter.
| 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 | € 2,15 |
Pressure |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,25 |
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 |
€ 1,80 |
Pressure |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,30 |
Pressure |
| 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 | € 1,65 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,70 |
Steady |
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