German Perspective - 17.12.13
17/12/2013
The first bids were placed well under November prices but the new week had barely started and it was already clear that all attempts were in vain; the prices had been set already. One can image the joy packers must have felt when they realised they would not have to end the year with a reduction in prices; hide sellers are the ones who will have to deal with the situation. Tanners in the meantime have dug their heels in and are trying to take the same position against the hide suppliers as the hide suppliers have tried to take against the packers. It’s a difficult match.
We still believe that there is a big difference between the fresh male, automotive hides and the rest. It is pretty obvious that on one side, automotive tanners are having a tough time trying to negotiate leather prices with seat manufacturers or auto makers themselves, while on the other side the automotive industry is celebrating success in export sales and predicting a positive outlook for car sales in 2014. Knowing that the kill is going to decline in the first quarter, it is difficult to explain why fewer hides in combination with strong leather demand could convert into falling prices. The automotive industry has few options. It can either make quality concessions (unlikely), substitutions (unlikely in the short term) or risk the supply chain being broken one day if tanners are no longer willing to meet their demands or go out of business.
The biggest mistake, in our opinion, is to try to apply this situation to other markets. The situation in other leather segments is totally different and there is no justification for preventing different raw materials from taking different price directions. We fail to understand why all hides at the slaughterhouse have to move into the same direction. All up or all down makes no sense, because this is not the way the leather business is anymore. Anyway, the market is still two-fold. All overseas export hides face pressure, with tanners trying to push prices down, the dollar going lower again, by 3%, and the interruption due to the holiday season in Europe, followed by Chinese New Year at the end of January and the slow-down in leather orders. Although the supply-demand ratio for males in Europe is more favourable, even here tanners are beginning to create a defence strategy. Normally they would already be trying to secure supply for January, which they need, but they are trying to use the break and a late start back in January to play hard. As far as we are concerned this could become risky considering that the kill of their favourite material will decline sharply too.
All in all, one has to begin to worry about the market. Hardly ever in the last six months have we received so many unsolicited offers of hides. This is in serious conflict with all those who had been reporting large forward sales and limited supplies.
Sales this week were rather patchy, with only a few tanners buying minimum quantities and many offers or negotiations remaining open. The handful of hides sold were a few bulls, a few low grades and a small quantity of dairy cows. While low grades and bulls were just about steady, we have taken the decision to accept a price we consider to be $2 lower than market level.
The kill: The kill was still reasonable this week. However, butchers complain that their fridges are full and sales are not meeting expectations. Many need to take a break now and reduce slaughter because beef sales are not good enough to absorb the high kill of the past weeks. So, we expect the kill now to drop sharply until mid-January.
What we expect: Everyone knows that we have not been too comfortable with the market since November and it seems now that there is some correction in the air. If buyers do not need to get back into the market now, it could be an ugly start to 2014. It’s all a bit like this summer, with the only difference being that we no longer have shelter from overseas markets.
| 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 |
€ 1,95 |
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 | € 2,30 |
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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