German Perspective - 04.03.14
04/03/2014
The key question is the trading volume at the present price levels. Is the volume really large enough to call this a market at the moment? We have our doubts, at least concerning raw material for quite a large part of the article range. One sale doesn’t make a market and 20% of the hides don’t create a solid price level. Sellers are just waiting for buyers to return and buyers are shifting as much of their raw material purchases to cheaper and more economic origins to escape the price demands of their standard supplies.
Apart from the situation in the raw material market, currency is becoming important again. The euro is gaining value and at the same time the Chinese government is devaluing the yuan surprisingly fast. For quite a long time was the Chinese currency was constantly gaining value and this was part of the calculation for those tanners importing and selling in that market; between the date of purchase and the actual opening of the letter of credit, some gains were generated from the currency market. In particular in the North of China many tanneries use importers and have to deposit the counter value in yuan to let the importers open a letter of credit in US dollars. It seems some people have been caught out by the extended turnaround of the Chinese currency. This came at the wrong time, too, because serious controls of pollution are hitting production too.
All this has had a pretty negative effect on shipments and sales and nobody can deny that it has taken quite a bit of the enthusiasm out of the general market, even if many people want to pretend they are still seeing enough demand and regular business. Consequently, we are dealing with a situation in which only the top-quality regular productions in Europe are running steadily and perhaps one or two industrial tanners in Asia too, but most of the others have become much more sensitive to the situation.
More and more people are beginning to wonder about the potential risk related to high prices. Many tanneries are holding better inventories than many people were willing to admit and can consequently reduce the volume of purchasing much more than one would really expect for this time of the year. It is bad timing, because hardly anyone is interested in any serious purchasing in the build-up to the APLF exhibition in Hong Kong at the end of March. Before that, we have the Lineapelle exhibition in Bologna, which might not be so important in spring, but it is still a meeting point for opinions and feelings to be exchanged and analysed.
It seems fair to say that the general optimism about the market is beginning to fade and people are starting to consider that there might be an alternative to scarcity and rising prices. However, so far the beef industry is not willing to surrender and it might still need a bit more time and pain to make people prepare for something new.
Trade and sales this week were reasonably limited. Cheaper and more economic hides were still in the limelight and it was the easiest job to move them. Ox-heifer material was also still able to attract some attention, but in particular cows for the key markets in China found few interested bidders. Consequently sales were a fraction better than in the weeks before, but still not good enough and in particular not well balanced across the article range.
The kill: After the rebound of slaughter numbers last week, production fell again, which is not really a surprise considering Carnival week and the start of Lent. One has to believe that numbers will remain reduced for the rest of the month. Weights are beginning to decline already, which is pretty early.
What we expect: The situation should remain pretty quiet. In most of the Catholic parts of Europe, Carnival will dominate and the beef industry and the tanning industry will not run at full capacity. The week after, a good number of people will travel to Italy to visit the Lineapelle fair in Bologna. This might be the first milestone for a market analysis. Two weeks later, people will meet again in Hong Kong and that might be the real moment for market evaluation.
| 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 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,25 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,95 |
Weakish |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,80 |
Weakish |
|
| 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 | € 2,30 |
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 | € 1,70 |
Firmer |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Firmer |
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