German Perspective - 13.11.18 - leatherbiz: Lea Leatherbiz

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German Perspective - 13.11.18

13/11/2018
What happened this week: There is still no boost in leather demand anywhere. The existing level of business and production is not enough to absorb the hide numbers resulting from current slaughter. The trade is still struggling to figure out what the demand and production for fresh hides is really going to be between now and the end of the year. There is still an unclear situation around the automotive tanners and the level of production within their sector. In private a few more tanners have declared that they will slow production down, but not to the extent that one of the big players had already announced. Piece by piece, in the highest production season for hides, the demand is fading when it normally should be on the rise.

As far as the heavy and higher-quality hides are concerned the worry about demand is more limited, because these hides always find a buyer if they are cheap enough. The main topic of discussion is around what a correct valuation for this material is. Here, opinions are drifting apart. After years when prices were very stable thanks to the boom in vehicle demand and expanding production of cars, we are now facing a cocktail of fading demand and the temporary rise in supply. There is also a declining valuation of low grades and there are plenty of cheaper options. Rising production costs and a substantial decline in split revenues play their role as well, as does the index-based pricing of many automotive leather contracts.from the market and to store them, the price adjustment phase could take longer, but we believe it is inevitable.

All this is making it impossible to sustain the high price levels any longer. The heavy bulls have to find a new level at which they will gain sufficient market share to get back into balance again. Here the sales policy of the main producers play also a role. The biggest output derives from the packers through their marketing arms themselves. If they decide to withdraw excessive numbers

In all the discussions about animal welfare and sustainability the latest news about problems in two slaughterhouses ended in closing the plants down for some time until the issues were solved and necessary investments made. In the other sectors of the market the fight to halt the price decline continues.

We are getting close to levels that are as low as those of 2008. The only difference is that in 2008 a lot of money and interest from China turned the market around, and this is definitely missing now. Some bargain hunters were seen this week. We decided to take up some of the interest after the usual fight for the last dollar. With a strict selection of clients and strict conditions for payment and shipment, we were able to clear low grades and to save space for the Christmas season and higher quality hides, which should not be dumped at this stage. So, we were able to reach a reasonable number of hides sold, but not at reasonable prices. A few bits and pieces in Europe were added and so we could be satisfied about the volume at least.

The kill: The kill continues to be at normal seasonal levels. The number of heifers is climbing and the weights too. Males are coming in now at higher average weights.

What we expect: Our market is struggling to find a base, at the abattoir gate as well as at the tannery door. The adjustment for males is now in full swing while we think that the females are now low enough to gain market-share, despite the difficult situation in general. We would expect to see the market in general still under pressure, but the bottom for cows should be close, while males might not be there yet.
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 € 0,95 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

 Weakish

30/+ kg

33,5/35,5 kg

27/+ kg

29/31 kg

€ 0,60

 Weakish
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 1,50
 Weak
30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1.50
 Weak
40/+ kg 45,0/48,0 kg 34/+ kg 38/40 kg € 1.45
 Weak
Thirds 15/+ kg 25,0/27,5 kg 13/+ kg 24/26 kg € 0,40
 Weak
Thirds bulls 30/+ kg 38,0/40,0 kg 24/+ kg 33/36 kg € 0,80
 Weakish




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