German Perspective - 22.11.16
22/11/2016
None of this has any influence on the hide market or leather demand, but indirectly we are already seeing certain consequences in the currency markets and for US interest rates. One can come to many different conclusions about whether this is going to be good or bad for commodities and the consumer retail market. Anything can happen in 2017, but the majority believes that increasing protectionism will be more negative than positive.
Companies that are acting globally are having intensive meetings in regard to what the changes will mean for their sales and investment strategy. For the hide business this week the increased nervousness could be felt. We think it’s fair to say it hasn’t really changed very much in regard to leather demand, but tanners, in particular in Asia, are trying to understand what it will mean for their businesses in the coming year. This is consequently directly related to their purchasing activity.
There was a bit of everything for everyone this week. A number of people pulled out, a number of tanners were willing to buy, but what was uniting all of them was a strong desire to do bottom-fishing. Buyers were very strict in their price ideas and depending on the hide type it was either yes or no, or only negotiable in a very narrow range.
Only quality sells. Business around the globe (including in China) is only reasonable for better selections. Leather has either to be very high in natural quality or of heavy substance, otherwise it will find it difficult to compete against artificial products. This means however that not only are low-grade raw materials under serious price pressure, but also that in the tanneries and along the supply chain a lot of low selections are continuing to build up. There is presently no indication that this trend is going to change in the next season.
Sales activity during the week was a reflection of the above. Currency was the big factor and helped us to obtain better returns for sales made in Asia. While prices in US dollars were pretty much unchanged, the higher US dollar helped to improve the returns in local currency.
The only strong performing sector at this moment is the upholstery market in China. Shoe continues to have serious problems and also automotive is far away from the dynamics we saw until the summer break. Heavy and good-quality cowhides can still be sold at the price levels we reached a few weeks ago. Beyond that interest has dried up very quickly. Males are having a pretty rough time with only a few exceptions at the very high end of the quality range. Total sales have been sufficient, but sales are still too focused on a few items only.
The kill: The kill continues to be good. Fortunately hide weights have now risen and are starting to get closer to the normal levels for this time of year. Slaughter numbers should stay high until Christmas.
What we expect: The question is now how excited people are going to become due to the currency situation. In the market, very little has changed in leather demand, which is not reaching normal seasonal levels. Currency will be a factor, but we think that prices will not change much.
| 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 | € 2,20 |
Weak |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.60 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.70 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,40 |
Firmish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,35 |
Firmish | |
| 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 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.80 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,25 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
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