German Perspective - 12.09.17
12/09/2017
Slowly but surely more and more people are beginning to realise that the problem doesn’t lie now at the beginning of September, but had already been created since the first quarter of the year. Players underestimated the general change in the balance of supply and demand and were just looking at the positive news rather than analysing properly the entire picture. Without any doubt there is still a lot of good leather business around, however it is not good enough and not widespread enough to absorb all the raw material produced and to sustain the price levels many beef producers around the globe had in their mind for their major by-product.
Another factor is also the big gap between sales and shipments or, better said, consumption. We in Europe might now complain that prices are due for a major correction, but a good proportion of the hides produced have been shipped, supported by the strong performance of the automotive industry and the quality leather producers we still have in our part of the world. Also the dairy cow business performed above average because the general premium furniture upholstery demand has not suffered to the extent we have seen in the shoe sector.
Everything remains connected. Several hide types that are ideal for use in shoe leather production have become so cheap that they are even beating the standard items such as dairy cows. In addition buyers of leather in all sectors have begun to realise the weak performance of the raw material market in general and to ask for their share in the reductions. It is very difficult to explain to a general leather buyer with only limited technical knowledge how it could be that some raw material and leather types still remain at record high levels while others have undergone price corrections of 25% and more over the past four months. There might be justifications, but the pressure begins to mount.
The main problem remains and has got worse over the summer. The number of hides taken by the leather industry hasn’t been sufficient to absorb the total number of hides produced by the beef industry in the same period. What this means for the market and prices everybody knows and this is what we see now; it hasn't become any better with all the trips to Asia over the past weeks. This is not only because of the declining leather demand, but also due to the decline of tanning capacity in China as a consequence of the the government controls and shut downs owing to environmental issues.
It might be that the business will shift to bigger, more modern factories, but so far this hasn’t happened yet. Anyway, it is still early in the season and the final decision for orders and volumes hasn’t been taken yet. Generally, one has to expect that leather business will get better, even if it is only because of the season of the year.
The trade shows in the coming weeks will let us know how things are proceeding not only for leather, but also for consumer goods. Sales this week have been just with the prime clients who always buy. They took their volumes and insisted on price concessions in sympathy with the market. The US dollar fell further, which made the very few sales in Asia difficult and euro revenues have eroded once again.
The kill: The kill was inflated at the start of September because of the Eid al-Adha festival celebrated by the Muslim community. This week numbers fell back to normal, to adequate seasonal levels. Nothing special, but numbers are adequate after the very slow summer.
What we expect: The trade is fighting to bring abattoir prices back in line with the global realities. It’s not that easy, with there always being someone who believes that this is the time more for politics than for business. However, if not now certainly later, nobody escapes from the truth in the end. For the time being, the downward trend persists awaiting better leather sales.
| 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 |
Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.50 |
Weakish |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.65 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,35 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,35 |
Weakish | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,85 |
Weakish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.85 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.75 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,10 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
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