German Perspective – 18.06.19
18/06/2019
For many players, both at home and abroad, it is becoming increasingly evident that they run the risk of entering the holiday season with an excessive number of hides in stock. That is only half the problem as the beginning of September sees the start of the season of higher kills. This usually goes hand in hand with an increase in production and demand for raw material from the tanning industry. This may take place in 2019, but at a much lower and inadequate plateau.
The bottom line is that this means you leave the low season of demand with some stocks already. Many now believe that the rise in demand later this year may not be enough to clear the stocks, and possibly not even enough to meet the supply of hides from the active season. The consequence of this would be further rising stocks, which would result in additional price pressure for several grades (females and low grades) that have little room to go any lower. This makes it even more difficult to understand why abattoir prices are not adjusting in larger steps, which they should do in view of the present market situation.
Under these conditions, we should be happy that the kill in our part of the world is entering the lowest numbers of the year and that this will last for another two months of so. We see the exact opposite in other parts of the world, where beef demand remains very strong and slaughter is extremely high. This is creating further congestion in the supply chain and those visiting the main centres around the globe are reporting that this is happening all over. Mountains of wet blue and crust are not moving at all and many tanners are processing just for further stocks. The extremely cheap raw material prices allow them to continue to do this.
Discussions with tanners suggest there is no sign of when leather demand is going to pick up or what needs to be done to turn things around. Most tanners are taking a “wait and see” position at the moment. This has been the case for several months for a good number of them, but it is difficult to judge for how long this situation can continue.
In most parts of the world it is difficult to run leather production at levels below 80% of capacity for a long period of time. It is unlikely that the situation will change until the end of the summer. So far, we have seen some tanners, in particular in China, stop production. It is unrealistic to expect there not to be further consequences unless we see positive changes soon. Those still enjoying a reasonable and regular base of business are those producing outside the mainstream, such as those who are part of the supply chains of the big brands or who produce natural leathers of the various kinds.
Sales were again sporadic last week. In our case, it was mostly heavy males to tanners who usual don’t touch them because they are too expensive. However, at present prices levels they are an alternative to slightly cheaper standards. The more the price gap closes and the general price levels falls, the more tanners become interested in the next best article.
The kill: The kill is pretty low as beef demand is dull. For many farmers it is a better option to keep cattle in the fields rather than accept low prices. Weights are falling and we are entering the standard pattern of the season. Little is expected to change in the coming weeks.
What we expect: The drama is certainly not over yet. Without an improvement in leather demand it will take some time to absorb the backlog of hides that have piled up and those that are still to come. The decline of prices will slow, but will not stop yet. At this stage, we better prepare for a hot and difficult summer.
| 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 | € 1,40 |
Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 0,70 | Weakish |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,65 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,50 |
Weaker | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,45 |
Weaker | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,20 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.25 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.10 |
Pressure |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,30 |
Weakish |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,50 |
Weak |
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