German Perspective - 29.11.16
29/11/2016
It is true that a firmer US dollar has offered better returns for export sales and anyone who has taken forward sales is enjoying windfall profits, but a windfall profit is called a windfall profit because it is not sustainable. Consequently a moderate rise in prices up to €2 per piece is adequate, but is not an indication of a turnaround. Looking at the leather market it will be hard to find a single tanner who is not complaining that customers are becoming more demanding in terms of quality. Customers are also looking for lower leather prices and remain absolutely unwilling to commit to quantities and programmes.
Good automotive leather and luxury brand sales (even if they are not as good as they were some months ago) have not made it any better for the wider market. The Christmas season is also beginning to affect the market. Even with the majority of tanners only shutting down for one week or 10 days, the interruption will cause pain.
The kill remains high and the curtailed tanning capacity in Italy continues to cause headaches, in particular for those who are dependent on fresh, chilled shipments in the region. In particular, males which mostly stay in Europe, need the capacity there to get moved without being salted and stored. There has hardly ever really been a volume market for these hides outside Europe and this is now making it difficult to absorb the excess hides being produced at the moment. Even the currency situation is failing to make them a real bargain overseas.
When one also looks at the active buyers from Asia in the past weeks it is obvious that the majority are more traders than real tanners. This reminds us of last year and of the first quarter of 2016 when we also experienced a rally with rising prices until the Chinese New Year holiday, and total disappointment afterwards. Misinterpretation of the leather demand and false expectation of split returns boosted raw material prices to levels that were never justified and the entire supply chain suffered. It took until this autumn to adjust prices back to workable levels.
It seems that some traders are trying to play a similar game again just to profit from short-term market gains or projections of a positive trend in the chinese economy and property market.
Sales this week were limited to the renewal of regular programmes. There might have been some business for cows in China, but mostly for heavy and high-quality selections. There were other enquiries for low grades but they did not lead to much success owing to the discrepancy in price ideas. In the end it was a very quiet week with people looking for something material that had already been cleaned up and not willing to buy what was still on sale. Prices were marginally lower for males and steady for dairy cows, at least for the business concluded.
The kill: The kill is now as steady as it can be. Numbers are still good. Weights are better, but still lagging behind the normal seasonal averages for cows. The cow kill is beginning to fade slowly after the hefty numbers since spring. Until Christmas we should not see too much difference in supply.
What do we expect: The next weeks will be interesting. Europe seems to have covered its needs for the year. So, it all depends on the position of the Asian buyers. If they show interest again, prices can hold. If we see some more weeks with relatively slow business, the trade will have to deal with price issues again.
| 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 |
Steady | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,35 |
Steady | |
| 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 |
Share this story:
