German Perspective - 01.10.19

01/10/2019

What happened this week: Even with climate change, summer in the northern hemisphere is now at an end. Days are getting shorter, temperatures are slowly coming down on some nights are already reasonably cold. So far everything continues as normal and this is also the case with activity in the leather business. Although we are still fighting the same problems of material use in commodity consumer products, one can definitely sense the seasonal recovery of activity, which always begins towards the end of September.

We guess everybody will remember the summer of 2019 as one of the most difficult in the hide business so far. The general changes were topped up by a lot of additional problems. The trade war, the rising indications of a slowdown in the global economy and the big number of uncertainties deriving from the change of public opinion in regard to the environment. This is all dramatically amplified when you live in Europe and in particular in continental Europe.

Media attention and public presence in particular reflected by the Fridays For Future is high and leaves the impression that this could be a global trend. No matter what the campaigners think, the experience of the vast majority of the global population is not the same. For various reasons beef consumption in Asia continues to rise and also in the Americas there is no indication that people are shifting in their attitudes. Good or bad, this means also that basically everybody who is willing to consume meat cannot question leather as a material.

Mass producers are still quite happy to use cheaper materials and to justify their business strategy by claiming to use recycled products. Just for the record, still less than 10% of plastic is recycled and we don’t want to talk about the conditions under which this is happening. Price and profitability remain the driving factors in our society and the sharp reduction of raw material and leather prices is beginning, slowly, to have an effect.

Here and there, manufacturers who are still willing and able to use leather as a material are beginning to increase the percentage of leather in their production. This is not offering any fundamental change because the rise in beef demand and beef production has been much bigger than the possible rise in demand for bovine hides that we see at the moment. In the ovine section too much market has been lost already and even seeing a good amount of leather on the catwalks at the Milan Fashion Week will not change anything fundamentally.

Anyway, the seasonal rise in activity can be felt and this is also reflected in raw material demand. Tanners are buying more hides even though they are absolutely aware that there isn’t any kind of shortage. More demand has come particularly from Asia under the lead of China. The interest in good quality female hides at the prices established during the summer has continued to stabilise. Stable quality, reasonable shipping times and steady prices have led to orders for sufficient volumes to clear production. Any attempt to get even one cent more was immediately answered with the termination of the negotiation. The focus of the demand was once again on everything that is called heavy and good and lighter weights and more commodity qualities have had to be wrapped into packages with very stiff negotiations to get them sold. The male section was once again dominated by the regular programme of sales in Europe. Same situation: Lower or steady prices or nothing.

The kill: The kill has dropped back surprisingly and we understand that this is not because of a lack of cattle on offer, but lower demand in the supermarkets. The weather may still have been too good to support more beef consumption. Also weights have dropped somewhat, which is also a surprise.

What we expect: We go to Milan and hope for more information about what we can expect for the winter season. We continue to believe that it’s not going to be easy and supporting good clients is the number-one priority.

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	€ 1,20	Stable
	25/29,5 kg	27,5/28,5 kg	22/27 kg	25/26 kg	€ 0,65	Stable
Dairy cows	15/24,5 kg	22,5/23,5 kg	13/22 kg	20/21 kg	€ 0,65	Stable
	25/29,5 kg	27,5/28,5 kg	22/27 kg	25/26 kg	€ 0,50	Stable
	30/+kg	33,5/35,5 kg	27/+kg	29/31 kg	€ 0,45	Stable
Bulls	25/29,5 kg	27,5/28,5 kg	22/ 27 kg	25/26 kg	€ 1,15	Pressure
	30/39,5 kg	36,0/37,0 kg	24/34 kg	31/33 kg	€ 1.15	Pressure
	40/+ kg	45,0/48,0 kg	34/+kg	38/40 kg	€ 1.05	Pressure
Thirds	15/+kg	25,0/27,5 kg	13/+kg	24/26 kg	€ 0,30	Weak
Thirds bulls	30/+kg	38,0/40,0 kg	24/+kg	33/36 kg	€ 0,40	Weak

German Perspective - 01.10.19 - leatherbiz: Lea

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German Perspective - 01.10.19