German Perspective - 11.04.17
11/04/2017
The fair in Hong Kong is often used as an excuse in March, although all the information needed to understand if price levels can be sustained or if corrections need to be applied is already available. The same happened this year, with people looking at the prices that had been achieved for smaller volumes, rather than the volumes themselves. Market activity had already slowed down significantly since Chinese New Year at the end of January. The few isolated deals for dairy cows and similar products was not representative of the real market situation.
In the end, tanners tend to behave the same way at this time of year. On the way up, they all fight for themselves; on the way down, they stick their heads together and try to force market prices substantially lower. Business slows down, lower offers are coordinated; 2017 has been no exception. This is what we saw in Hong Kong and in the past week.
Public holidays in the first half of last week gave Chinese tanners another excuse to refrain from market activity. This kind of ‘boom and bust’ mentality can be seen frequently in China, but is fortunately less pronounced in Europe. China’s big influence on the cow market means we have to deal with it again. The big question now is how the game will be played during the low season of the coming months.
Demand for leather is far more consistent from the high-end automotive industry, as well as from better quality footwear manufacturers and those interested in vegetable-tanned leather. Most of this production is concentrated in Europe. Traditionally, these tanners do not run large inventories, instead managing their supply chain with regular, repeat orders. This makes business far more predictable. As long as there is no major change in production or leather demand, they can count on consistent business.
We are now entering the low season of the kill, as well as a time of lighter weight hides. Trading last week was relatively light and there was little follow-up to the deals agreed in Hong Kong. This ended with sales numbers for the week fairly low. Prices were mostly steady for males, but weaker for cows. The firmer US dollar was helping to keep euro price declines under control.
The kill: Numbers remained on a normal level for this time of year. With the Easter holidays ahead and beef consumption declining at this time of year, a reduction in slaughter numbers was to be expected. Within the next week, the annual turnaround in hide weight should take place.
What we expect: Work to correct the cow market got underway in Hong Kong, and it is going to be quite interesting to see where it is going to lead. It seems that Chinese tanners have a plan to do this in stages. The relationship between leather prices and the cost of production and raw materials means there will be some room for movement.
| 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 |
Steady |
| 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 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,50 |
Weak | |
|
30/+kg |
33,5/35,5 kg |
27/+kg |
29/31 kg |
€1,40 |
Weak | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | €1,90 |
Steady |
| 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 | €1.80 |
Steady |
|
| Thirds | 15/+kg | 25,0/27,5 kg | 13/+kg | 24/26 kg | €1,20 |
Weak |
| Thirds bulls | 30/+kg | 38,0/40,0 kg | 24/+kg | 33/36 kg | €1.25 |
Steady |
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