German Perspective - 07.08.18
07/08/2018
A number of farmers are selling cattle because they can no longer feed them. This is sending beef prices down and has led to an unusually high kill for the time of year as well as for the weather conditions, which are typically very negative for beef consumption. Apart from the higher kill, which is certainly coming at the wrong time of year, we understand from farmers and slaughterhouses that we should expect fewer cattle in 2019, which would have a negative effect on slaughter numbers.
So many predictions have already been made, many of which were wrong, so it might be better to simply watch and analyse the regular cattle headcount to judge what the real direction is. If one were to follow the opinion of the media, we would have no more slaughter. All the messages seem to be anti-beef, vegetarian, vegan, sustainable, certified, and so on, but consumers continue to consume meat and beef, just as they continue to purchase gas-guzzling SUVs despite all the hype about emissions. As long as it available, it is consumed.
There are also lessons to be learned from the shoe brands and retailers. Despite all the statements in favour of leather, the footwear industry has reduced its offering of leather shoes and the consumer has to buy what it available. Since leather is not really understood as a material, the consumer doesn’t feel particularly unhappy or realise they are missing anything. This remains the fundamental problem of the market.
There is still a surplus of raw material. Prices have not been stimulated, which is demonstrated by the fact that high quality hides retain their value while there remains an excess of low quality hides which have no value. They may have a price, but they cannot be cleared at this price.
The industry continues to use any kind of trick to hide the reality of the situation, with isolated sales weeks used to declare that the market has stabilised. This is simply not true, as can be seen by the figures for weekly or monthly trade. All signs indicate that we are moving towards more raw material destruction to restore the balance of supply and demand.
Many tanners claim the price of raw material is the problem and that it has to be cheaper every time. This is not the case, which is demonstrated by the rising interest, including from China, for higher quality hides. They just want to get more for their money and do no find a market for low grade and corrected leathers. They simply want better quality hides and try to grab whatever fits into their product range.
The situation was also reflected in this week’s trading. Europe was almost completely out of the market, but China remained reasonably busy. The problem that remains is finding a common base. There is no interest for light cows and low selections, and buyers are cherry picking for heavy cows and higher quality material.
Clients tried to take advantage of the holidays here and thought that any kind of bid would be enough to get better and heavier hides. There was a lot of resistance to counter bids, but in the end premium hides were sold for close to their asking prices. There was no common base for standard and lighter weight cows and no sales were generated. As a result, the numbers were not brilliant, but at least some business was done.
The kill: The kill is pretty impressive considering the temperatures and the time of the year. However, it is concentrated in cows and heifers, while bulls remain pretty scarce. Cattle traders report that many farmers from drought-hit regions are just asking for cattle to be collected and do not even argue about the price. There is no end in sight for the heat.
What we expect: We do not expect any change in the market. The Chinese tanners are picking around and we think this will also continue. The feeling remains that everything will be cheaper next week and that a later buy is a better buy. We need to substantially reduce abattoir prices in order to prevent more issues.
| 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 |
Stable |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,10 | Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,95 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,80 |
Weak | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,70 |
Weak | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,60 |
Stable |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.65 |
Stable |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.55 |
Stable |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € n.a. |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,80 |
Steady |
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