German Perspective - 21.06.16
21/06/2016
Last year ended with a good portion of optimism and tanners were still willing to replenish their raw material inventory but this began to fade quickly with the start of the Chinese New Year holidays in February 2016. This applies mainly to the hides that are related to the Chinese upholstery market and standard shoes. The large brands and quality producers might have been facing serious problems over prices, but in general their business held pretty steady and they were possibly looking at cheaper manufacturing options outside China and testing leather alternatives for the time being.
Leather and raw material demand shrank in the second quarter, although not across the board. This was reflected in the price reductions for many hide types. In general it is fair to say that the material had to be suitable for automotive or of premium quality or of high substance to find a enough customer interest. For the rest it became increasingly difficult to remain in successful competition with alternative materials. Cash flow issues added to the slow-down in China and weighed on the demand for raw material. The consequence was an increasing spread between prices of the different raw materials depending on their use. At the end of the first six months of the year many are preparing for the summer break and drawing a line to understand what the outlook for the rest of the year is.
Activity this past week was mixed. The week started quite active with a number of bids, even from China; some of them even finished in sales. Due to positive reports from the US, one was encouraged to ask for a bit more money for the hides offered in the hope that some of the positive and rising prices across the Atlantic would spill into our market too. However, this was not the case and only accepting asking prices from the previous week led to sales. Asking more or countering the steady bids killed the deal.
In Europe business was dominated by the regular and stable sales of male hides. It is now the final round of sales before they all shut down for the holidays, which meant more talks about planning than about sales, which where almost completely renewed at unchanged prices levels. However, we have seen stable conditions in this market already for many months and there are now rumours that soakings and demand might decline after the summer holidays.
There is nothing fixed or clear yet, but in many conversations concerns were raised about the risk of declining demand in the shoe and automotive sector later in the year. Seasonal activity usually means a boost in activity from September onwards. It is too early to say, but sometimes where there is smoke there is also fire.
Although the week might have been satisfying in sales it was surprising how quickly the interest dried up after Wednesday. We would call prices weak-to-steady and only a short moment on the currency markets on Thursday allowed us to grab some benefit.
The kill: The weather is pretty weird, but heavy rain showers with reasonably warm temperatures let the grass grow. As usual at this time of the year the kill is low and this will remain for the next eight-to-ten weeks. Farmers are now waiting for subsidies owing to problems in the milk market and they will either receive funding to support low-milk prices or compensation if they kill cattle to reduce supply.
What we expect: The next week will be dominated by the wrestling-match between tanners and suppliers to see who gains the upper hand in the cow market. We still don’t like the situation in China and think it would be best to secure regular sales and shipments to reliable partners.
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 | € 2,30 |
Weak |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.80 |
Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.70 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,45 |
Stabilizing | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,40 |
Stabilizing | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,90 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.90 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.85 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,30 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.30 |
Steady |
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