German Perspective - 18.09.18
18/09/2018
Pricing continues to be the big headache. Abattoir prices do not reflect the average return that can be made from hides and we continue to see the same games played by many suppliers to increase the average return for hides coming in from slaughterhouses. Nobody likes to admit that low-grade hides are always part of the cocktail that comes from the slaughterhouse. We have not had a clean back-to-back calculation on sales prices for a while.
Hide types that are traditionally in demand among Asian customers have not found a solid valuation level so far. We are in a continuous retreat on price. Lower prices no longer stimulate demand and are not very helpful in stabilising the situation. However, it seems pretty likely that with the rise of production in the winter season, in combination with the substantially reduced purchasing during the summer, the need for replenishment from the upholstery tanners in China has to become more regular. For dairy cows now, there are not really too many cheaper alternatives that could justify any further decline. Only significant unsold inventory that needs liquidating could possibly create another major downward adjustment in the coming weeks. Payments might be an issue too.
In Europe the situation is certainly better. Tanners have more regular orders and the pipeline works on a more regular base. The only problem is just that the European tanning industry cannot absorb all the hides produced locally. Generally one can feel more headwinds from the automotive tanners too.
It seems that leather orders for the last quarter are not meeting expectations and a certain slowdown in raw material demand can be felt. This is affecting even the premium heavy bulls now. This is not going to end in collapse, but it seems that tanners are now working on an orderly retreat of prices for the coming months. Nobody has any interest in a sharp correction until the end of the year, but it is obvious that tanners will do their utmost to achieve price declines step-by-step, most likely until the end of the year. The expectation of a higher kill for males and slightly reduced general demand will make it easier for tanners to be successful in these attempts.
Business this past week was pretty difficult. There were orders and bids from Asia for dairy cows, but there was also very conflicting information about prices, from very low levels, in the early to mid-20s, up to very odd reports about sales well above $30. Most likely every price comes with a special story.
Generally we believe that the market this week was pretty stable compared to the prices being spread around after the All China Leather Exhibition in Shanghai at the end of August. Sales in Europe are reasonably steady for cows, while male hides had to take moderate price reductions into consideration. Certainly there is more opportunity for sales than there was before, but some courage is required if one is looking for decent volumes of sales. The low end remains extremely critical, because prices barely cover collection and processing costs.
The kill: The kill has recovered a little and the number of males also rose. Weights remain low for the season and with the warm weather continuing a real surge in production might still arrive in the coming weeks.
What do we expect: It seems that we are beginning slowly to see market adjustments. Cows may have found a bottom for the moment while males seem to be in an adjustment phase, coming back into line with international levels. The next milestone will be the Lineapelle fair in Milan (September 25-27). Until then not much should change.
| 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 | Stable |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,90 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,70 |
Stabilizing | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,60 |
Stabilzing | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,60 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.60 |
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 | € 0,60 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,80 |
Steady |
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