German Perspective - 13.03.18
13/03/2018
We in the hide industry have been living in a new world for a while now. People understand this, but that’s not to say they accept it. We have focused sufficiently on the changes hides and skins have been undergoing in terms of demand, but the business has become more industrial and is now being run by the large beef companies around the world, who still seem to have difficulty understanding that these by-products cannot be managed by supply.
For decades, global studies have just focused on demand and have come to the same conclusion time after time. The more consumers there are withmore income, the price for leather and raw material must go up. Period. No criticism allowed. This is paradise for a first-hand owner and producer of raw material. The equation may have worked so far pretty well for the high-quality raw material producers able to connect to high-leverage use of leather, such as in luxury accessories, leathergoods and automotive, as we all know pretty well.
The rest of the raw material has been ignored, as have the trends in the shoe, garment and upholstery industries. Once again the trigger for change was price and the fairytale of a raw material shortage. All that did was convince those finished product sectors to move on and to find out how nice, simple and competitive alternative materials could be, allowing them to expand productions and turnover. And all of this in addition to the poor image of leather projected by some campaign groups. There have been anti-meat campaigns too, but on a global scale these haven’t been too successful on reducing meat consumption. But it has given finished product companies an excuse to walk away from leather and use plastic instead.
Most in the beef and hide industry, as well as the leather industry, seem to have ignored the trends and were convinced that the old school rules would still apply: “Demand and price come and go, and swing up and down … .” For much of the market this has proven not to be the case and pricing policies have not worked out. Material that wasn’t needed wasn’t bought. There was no decision to adjust prices in a timely manner and then demand faded quickly and stocks began to rise. At the lower end of the quality range, this began to happen a long time ago.
Having reached the end of the winter season and ahead of meetings in Hong Kong, it is difficult to think of an easy solution. It took a little while for these problems to reach Europe, but since the Lineapelle exhibition in Milan in February, the headwinds have also been blowing in this part of the world, at least for lower qualities and lighter-weight cows. The gap between performing and non-performing raw material ranges, that is between those lower-quality hides and high-quality, heavy hides and calfskins, has become wider.
Business this week has been as it has been for weeks: regular in Europe for the hides that are performing well and spotty, at best, for the rest. In Asia, too, most of the interest has been in heavier and better hides. Certain price concessions have had to be made here and there on the hides people were looking for while there was absolutely no interest in others. This is not particularly new. The total number of sales once again failed to meet supply and like everywhere else in the world there are grades that are cleared on a regular basis while others remain unsold with little prospect of a change, unless there is a very positive surprise in Hong Kong.
The kill: The kill continues to under-perform, which might either be seasonal or a reflection of a real decline in demand. It’s difficult to judge at this time of the year. A lot of imported beef is available at very competitive prices, which may make the life of local packers more difficult. Until Easter (March 31 this year) there is little reason to expect any real change.
What we expect: Well, everything is pointing towards a disappointing show this week. If the industry cannot trigger new demand, things will remain difficult for the volume materials and the surplus of supply will persist. It will need more creativity than what has been displayed so far. However, we have good arguments on our side, which the success of quality leather proves.
| 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 | € 2,10 |
Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,20 |
Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.30 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,10 |
Weak | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,05 |
Weaker | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,70 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.70 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.60 |
Stable |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,90 |
Weakish |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.10 |
Steady |
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