German Perspective – 27.11.18
27/11/2018
The big question is if the expected recovery in production will happen in the second week of January of if the subdued conditions will weigh on the supply and demand situation for a longer period of time. Although many of the tanneries in Europe that have cut production are predicting that full production will resume by then, it still isn’t clear if this will actually be the case.
The automotive tanners in particular could be tempted to extend the period of lower production because their inventory pipeline seems to be fuller than their present production projections for vehicle manufacturers would require. It is difficult to get a clear idea because stocks from different origins are so much cheaper than the premium European male hides that vehicle producers could be tempted or forced to change their raw material suppliers.
Price negotiations with the automotive industry are not easy at the moment either. It appears the tanning industry is much more vulnerable in this sector than in others. The situation has not changed dramatically since the summer. Business with Asia is very difficult as well. Timing is an issue and there is just one more week that can be used for shipments if they are to arrive before the Chinese New Year. If this schedule cannot be met and payments or letters of credit do not arrive until the middle of the week, it will be very difficult to get hides out before the end of the year.
It is remarkable that the threat of tariffs from the US is not triggering any major shift of interest from Asia to Europe. There is no news of selling in recent weeks, a clear demonstration that tanners do not believe there is any risk of them being without hides. The Thanksgiving holiday break in the US has definitely left more interest and attention for Europe. We have seen some more interest, but this has come in the form of aggressively low bids on a ‘take it or leave it’ basis.
There is barely anything to negotiate and the risks associated with payment and shipment have also further shifted to suppliers. A lot of very cheap sales have been reported and we have come to the conclusion that quite a few of them could be true. The market slide continues for dairy cows and heifers in particular, while for males we are lacking any kind of interest that can be matched with the prices we are seeing at the abattoir doors in our region.
Fundamentally, we should not be worried because at the right price our hides will always sell. However, until the beef industry accepts the reality, it is a really tough situation. An adequate price adjustment is long overdue.
Total sales numbers last week were neither bad nor particularly good. Some business was concluded for the regular European programmes and there were some ‘Black Friday’ deals overseas. Time will tell if that was wrong or not. Retailers already know that early discounts around Thanksgiving are killing Christmas business, so let’s see if this is also the case in the hide trade.
The kill: Colder temperatures for the upcoming Christmas season are significantly boosting the kill. Slaughter is at the expected high levels, with the predicted rising average weights. For the next two or three weeks, anything but a continuation of these conditions would be a surprise.
What we expect: In the coming weeks, discussion with the European tanners about the regular supply programmes until the end of January are on the agenda. From Asia, we will have to see if buyers are willing to take the chance of historically low price levels or if the demand for leather is so poor that even these prices are not tempting. Prices for males will have to adjust further to become more competitive.
| 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 | € 1,60 |
Corrected |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 0,90 | Stable |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,80 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,60 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,55 |
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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