German Perspective - 28.04.15
28/04/2015
There was a bit of margin potential to be invested, but with the recent price adjustments overseas and the price adjustments that have been taken by various European suppliers, we are back to normal and the period of easy living that European suppliers were able to enjoy for some time looks like it’s over.
This means we have to watch market developments again with much more attention. Shipments and sales from the US have to be monitored. Some may celebrate increased sales, but we see it a bit differently. It seems that the high number of sales has been achieved by major price concessions and it’s questionable that the prices that are published are the real ones. Some of the large numbers must also be understood as covering shipping programmes for a certain period and are not a reflection of immediate increased demand for raw material.
In short, what has been sold from the US satisfies a good part of the demand that we were able to supply for quite a long time. The numbers are not from increased demand, only shifted interest. The interesting question now is how European suppliers will deal with the situation.
Many of them have focused on some isolated sales at more or less unchanged levels; they also point to the falling kill. This is pretty much the same story as the one we heard for a long time from the US, with the same arguments used to justify stable price quotes. It seems that in particular the beef industry over here is now trying to follow the same pattern. For the short term this may work out. The decent first quarter we Europeans had means it might take a bit of time for any serious new pressure to be felt. However, if there is no short-term flurry in demand, the problem will come at exactly the time nobody wants it, in summer. Anyway, there still a bit of time between now and then and so we have to deal from week to week.
The month of May is never really a time of great excitement because quite a number of holidays interrupt slaughter and leather production in Europe. The news from the leather market is not promising. Production is in its seasonal decline and while the big industrial producers still carry on reasonably regularly, smaller players are feeling the cold headwinds of falling demand more and more.
From various parts of China, we are receiving reports of closing shoe factories and leather producers in the low-price section, predominantly those who had been using splits; they are being wiped away by the substitution of artificial products and the massive pressure that the Chinese government is putting on polluting industries.
Trade in sales was also on a reasonably low level last week. One might have been able to sell some hides in Asia, but that would have meant a serious drop in prices. Taking those prices could not have been called a moderate slide any more, but a pretty decent correction. We were not willing to bite the bullet yet.
In Europe the situation was a bit easier and the regular programmes were renewed with very small price variations. It is true, however, that prices in Europe have been significantly lower than in Asia for quite some time already, so we are just talking about balance and adjustment because the spread had been too wide for some time.
The kill: No news. Reducing numbers and falling weights. In particular for dairy cows.
What we expect: Our expectations are running pretty low. After an easy time we are now beginning to enter a difficult time again. We don’t see that the market is ready for a new price correction and we are having to work hard for sales again (they are not just coming in voluntarily with the morning email as they did for so long).
| 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 |
Soft |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,10 |
Soft |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,35 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 2.05 |
Weaker | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,90 |
Soft | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,25 |
Weaker |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,20 |
Soft |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,05 |
Soft |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,80 |
Soft |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,80 |
Soft |
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