German Perspective – 20.11.18
20/11/2018
The pressure continues to mount. Central European hides have been invited to gain market share due to the shrinking demand for other origins. All debates and discussions that have taken place in 2018 about the fair value of German hides have been totally in vain.
The dream that the automotive industry would be the never-ending taker of leather which has to be made from certain hides was too sweet an opportunity for the beef industry to resist. The more time progressed, the greater the disconnection between prices and values. While the automotive industry remained unwilling to signal that production needed to be cut back, while the reduced summer kill was sufficiently placed, there was no real intention to monitor the basic trends of the market and to adjust prices accordingly. Every warning was dismissed.
The biggest frustration of all is that despite the crisis of leather demand, a hide from Germany actually had nothing to fear. Leather demand has not shrunk to a level at which German hides can no longer be regularly sold. The big mistake was that the levels being achieved by premium tanners for specific fresh hides were considered to be the ‘market’. Instead, we should have realised that the value gap between the hides here and others had become wider and wider.
If someone had been willing to deal with it, it was obvious for some time that other origins were beginning to gain market share. There were few signs at the beginning, with the seasonal lower kill in part compensating, but somebody should have realised. This can be seen in the extremely wide gap between the prices for males and for females. While females have traditionally shown much higher correlation with international prices, many people thought that males could create a biotope of its own in Europe.
It was too easy to see the fresh hides moved and productions being cleared. Little attention was paid to the slow but constant use of cheaper alternatives and origins. The complete turn of the scale came when production in the leather industry was also reduced, which suddenly became a threat to the plans of the industry. In fact, even today the message hasn’t been received and digested by everyone.
It is pretty easy to turn over all production from Central Europe when the price is competitive enough to grab the market needed to clear it. It was for a long time difficult to understand why many in the industry believed that the trend would disappear and that leather demand would simply come back out of the blue.
Business last week was again in a lull. Tanners with business take what they need and enjoy the falling raw material prices. The overhanging hides struggle to find enough buyers. There was some interest for heavy cows last week, a few deals for low grades, and some programmes renewed, but all in all not enough to believe in a real change.
Prices for males continue to be under pressure, while cows manged to sell on stable Euro levels by mid-week with the help of a firmer US dollar. However, the volume was too limited to consider this a new and secure level.
The kill: The kill continues at normal seasonal levels. The end of the warm autumn is now expected and this should further boost the kill. We should also expect some effects from the Christmas season to begin to influence the market. As a result, the number should remain high.
What we expect: Price adjustments at the slaughterhouses for November by no means reflect the entire market situation. It will take a miracle to make people believe that unrealistic levels still need to be paid to get enough hides. The tanner will not support this policy anymore. Prices remain under more pressure, more for males then for females. The struggle to get all hides shipped is not helping either.
| 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 | € 1.40 |
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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