German Perspective – 08.01.19
08/01/2019
The substantial decline of leather demand has been reflected since the second quarter of last year in steeply falling global prices. The price declines have not stimulated leather demand at all and so no balance has been found between supply and demand. General analysis indicates that raw material production is not going to decline due to relatively stable demand for beef.
With the same amount of raw material being produced, it would need a sharp rise in leather demand to clear the production and the overhanging inventories still around the globe. If the demand for leather does not rise, the only options are storage or destruction. It is far too early to make any forecasts about what the decision will be. At the moment, it appears the majority of players still have hope.
It is quite difficult to find any convincing argument that leather demand is going to rise soon. Consumers look for price and do not care much about durability and the specific advantages leather still has to offer. The manufacturing process of plastic offers massive advantages. This all means that we continue to miss the trigger that could make the consumer change their mind.
The anti-plastic campaign has not yet reached the point at which the consumer would be willing to ask for leather again. The manufacturers will be the last ones to promote a material that causes many more headaches than the automated processes that can be used with artificial materials.
People may say the above statement is a pessimistic view, but nobody can offer convincing arguments about how leather demand can be stimulated. We would welcome any good ideas that could push leather as a material back into the focus of the consumer. This means we have to hope for a recovery of sales of products that are still dominated by leather: quality shoes, medium- and high-end furniture and automotive sales.
Looking at these options, the weak performance of the global economy does not offer much short-term optimism. We are in an uncertain political and economic situation and things could go either way. In such situations, corporations usually take a more prudent position, which typically results in a ‘wait-and-see’ strategy.
Business activity has been very slow in the past two weeks due to the holiday period. There are always those who believe it worthwhile to send an email and ask the question, but we would say the results were limited with just a handful of sales concluded. It certainly did not offer any reflection of the market. We mainly saw interest for better quality and heavier cows, which are now certainly the best value for money. Buyers were once again only willing to buy at discounted prices, which we were not willing to take during the holiday season.
The kill: The kill was pretty low in the past two weeks due to the holidays. The New Year starts with more activity and we would expect the number to be normal this week. The excessive kill due to the dry summer means the number of available animals declines. Weights run at their seasonal highs and should remain heavy until the end of March.
What we expect: We don’t expect anything for next week except that the return of the European tanners means there will be more clarity about their plans for the first quarter. We are in the high season of production and many trade fairs are ahead of us, which will hopefully allow us to reach a better decision base for where we are heading in the first half of 2019. The Asian buyers should also disclose more regarding their needs.
| 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 |
Stable |
| 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 | € 0,35 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,75 |
Weakish |
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