German Perspective - 20.06.17
20/06/2017
Chinese buyers from the north, organised in their social media chat groups, had set price targets for dairy cows, which created a gap and potentially negative margin for sellers who were not able to adjust abattoir prices to anywhere near the levels required to compensate for the lower price ideas, the weaker US dollar and the increased costs. A few sellers in the past two months had to bite the bullet and to take what the market was willing to pay, but volumes were never sold at prices in the low $50s as the usual suspects were claiming.
This ended in the stalemate for weeks with very little business booked and with most players sitting on the fence waiting for the other to react. In a way, suppliers were in the better position, being aware that premium dairy cows cannot be that easily replaced and one day the inventories for the start of the next season will have to be replenished, whether the prices work out or not. Now the volume of interest has increased and the discipline in the syndicate has faded.
This is how things always go with this customer group. When they want to push the market down and they feel they have the upper hand, discipline is tight because everybody wants to secure a lower price and nobody wants to be the first to break away. But when the wind changes, it’s everyone for themselves, fighting to snap up a cheaper deal or the hides from a preferred supplier.
We would not be surprised to learn that much more business is being concluded now. Maybe not at the levels sellers are really looking for, but certainly much closer to their ideas than to those of the Chinese buyers.
Fundamentally things haven’t changed much: there has been no frenzied buying bonanza and we do not believe there is going to be one, but the market has now reached a price level that reflects the trade for dairy cows.
For those buyers who still struggle with the prices of hides, low grades have been the option. Whether these hides really can perform or have just been bought to fill drums and to hope for a lottery-win remains to be seen.
There was also a decent amount of interest in premium heavy cows, but the price-gap between buyers and the present value of these hides in Europe is still far too wide to be a serious consideration. For the other hides not much has changed. Production continues and drums have to be filled until the summer holidays, despite lower slaughter and reduced supply. In particular in Italy a lot of attractively priced overseas hides are being bought in wet blue and they are scheduled to arrive over the coming months. It is going to be interesting to see if this might shift the demand-balance a bit for several EU origins, the suppliers of which, even today, still believe things will never change.
With the help of the improved numbers from China sales, last week was satisfying and can be called a normal week. With the price levels reached and the moderately higher US dollar the risk of high negative margins has been turned into smaller negative margins. This still means abattoir prices have to adjust, but the pain is less, at least on the basis of this past week; it would be negligent to believe that this is some magic change for the better.
The kill: The kill is in summer mode. Numbers are normal. Pastures are green, sufficient rain and warm temperatures are what farmers need and like. From next week until the end of August we are going to be in holiday mode with the usual effect on numbers.
What we expect: There is something new in the market this week. However, this applies only for the Hebei tanners and buyers. For the rest we don’t feel that anything has changed. Shoe business is still not favourable to leather and the holidays are in front of us. The fundamentals are still the same. Sellers will now try to see how far they can go and maybe some will even have the courage to hold offers back to scare buyers and push prices up. Good luck.
| 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 |
Weakish |
|
|
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 | € 1.85 |
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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