German Perspective - 09.12.14
09/12/2014
At the end of a normal year nobody would be too upset by the general tranquility we are seeing in the market at the moment. Normally most business would be done, the market would be on stable ground and people would be looking forward to a pretty active and busy first quarter of the following year. This year the situation is a bit different because more and more of the market players are getting nervous.
Demand for hides and skins in the last quarter was definitely below average and below expectations, with the usual exceptions. The outlook for the busy season over the coming three months is not too bright. Even the bright spots, the automotive industry, cannot send enough positive signs to encourage the general market to believe that we are ready for a turnaround soon. All this has come unexpectedly for many. The last four years have been entirely positive and any fatigue was just a break in the trend, but not a halt. This made the raw materials business a bit too confident and too willing to ignore the hard facts.
We don’t want to go back over all the arguments and statements made already, but nobody should be too miserable about the situation yet, because we are still trading at price levels that, not too long ago, were at record levels. Even today, the present market correction could still be called a break in the trend and not a turn. However, there are good reasons why at least the possibility that raw material prices could return to levels that are far closer to the long-term average should at least not be totally ignored. The general parameters are at least set.
We should also not complain too much, at least not in Europe, because the retreat so far has been pretty mild and has taken place in an orderly way. Certainly we have been protected by the currency situation, which has offered a 10% shelter against anything more serious. The market and the trend over the past month would have certainly been different if the currency had not have acted as an air-bag. The big worry at the moment is that the rumours and stories of payment problems, problems with opening letters of credit and the desire of a number of clients to renegotiate contracts are increasing day by day. What was an isolated story has become common talk. Generally, this is a pretty strong indicator of a market that looks vulnerable.
Coming to this weeks market activity we have to say it was pretty quiet. In Europe one cannot really expect any further activity because, traditionally at this time of the year, tanners are set and done at least until mid-January. In Asia the situation was not much better and we had only a few regular clients who were willing to take some hand-to-mouth containers. This was mostly focused on cows again and the stronger US dollar allowed us once more to take bids that did not fully meet our asking prices. In euro the returns were pretty much the same if the timing of the currency hedging was well selected. This however was for a very limited quantity of hides sold.
The kill: The kill remains at very high levels and, even better, weights that had been so low for a long time are now meeting seasonal expectations. For the coming weeks we have no reason to believe that the kill will decline until a few days before Christmas.
What do we expect: The weak tone of the market will persist. We hope the sliding trend will continue and prices will gradually decline. For how long we can still count on the currency has to be seen. We don’t think that sellers will try too hard to promote their sales by discounting and so the official market may look a bit different now than it will in January.
| 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 | € 2,35 |
Weakening |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,10 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,30 |
Weakening |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.95 |
Weakening |
|
|
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 | € 2,25 |
Weakish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,20 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,05 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,75 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Steady |
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