German Perspective - 11.12.18
11/12/2018
As far as Europe is concerned the timing is pretty bad, because in particular the hide types that are traditionally entering the drums in Europe are mainly hit by production cuts. At the same time the slaughter numbers across Europe have been pretty high for various reasons. Several origins are enjoying a pretty good export business for beef and we are in the main consumption period of the year, with abundant supply of ready capital and the strong demand for prime cuts for the Christmas and New Year season.
As a consequence, there is a pretty decent surplus of raw material, material that was never a problem to place in past years. The surplus situation is nothing new, but in the past this was just the question of the final two weeks of the year and sometimes the first one of the new year. However, there was never any doubt that all these hides would be needed eventually and so solutions have been found to handle the material in the times when factories were closed.
Storing fresh or cooperation with contract tanners always made it possible to handle the supply. This year is completely different. Even if it’s not all discussed in public, we have, for the first time since maybe 2008, a situation in which hides in the range of more than 40 kilos remain unsold. The beef industry and hide processors have to analyse the situation and take decisions. The material is not really the one to stock and outlets for it are pretty limited.
At least the price levels have had been maintained for such a long time by strong and steady demand from the automotive industry and a few, select high-quality tanners for vegetable and extra heavy side leathers.
Certainly other tanneries around the globe will be interested in using this kind of premium material, but in their price ranges for finished leather these hides are not usually easy to find. In addition, many potential buyers still remember 2008 when these hides could also be bought cheaply, but as soon as demand in Europe recovered, nobody was willing to sell them overseas anymore. This means the full focus of hide suppliers remains on the customer base in Europe and the hope is that, with the declining slaughter, by the end of January at the latest, supply will start shrinking and the excessive stocks which have accumulated can be filtered back into the market.
Nobody can forecast what is going to happen, but certainly it is adequate to expect that the time for exceptional premium prices is over for a while and also these hide types will have to reintegrate themselves into the price- and quality-grades that are presently dominating the market. In the general business, sales are what they are at the moment. Selected hide types will always find the occasional buyer. Leather business is never zero and so there is always somebody who thinks that purchases now are either necessary or reasonable in price. This means that there is always a deal to be done, but this week this did not lead to any significant sales numbers. Most of the interest was for heifers and a few bits and pieces for some cows. Prices continue to be under pressure and every sale has to be at a lower price than before. This has become a pretty normal routine and it becomes difficult to explain to tanners in Asia that there might still be some room for negotiation, but it is definitely not unlimited.
The kill: Pretty high and heavy kill and we are now going into the final lap for the Christmas season.
What we expect: We cannot find any reason why the current trend should end before Christmas. The next deal has to be cheaper and you have to take any interest offered or you keep the hides. This cleans up a part of the production, but not all and so we stroll on as we have done now for a long time. It’s time to think about a plan B for 2019.
| 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 |
€ 0,70 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,58 |
Stabilized | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,53 |
Stabilized | |
| 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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