GERMAN PERSPECTIVE—17.03.20
What happened this week: People’s attention is clearly on things that are more important than the hide market these days. The $1 million question is what the consequences will be of everything that has happened over the past six weeks.
In China, the government claims daily life is quickly returning to normal and the spread of the virus is under control. Now the rest of the world is entering into a similar situation to the one China was facing several weeks ago.
In an attempt to slow the number of infections, government decisions are beginning to paralyse daily life. At first, production and the commerce were not affected too much, but sooner or later logistics are becoming a big challenge. Travel restrictions and quarantine measures are influencing truck transportation and it seems that the effects are going to intensify in the coming weeks.
If the predictions of scientists are correct we have to expect a long period to pass before the situation is under control. Everyone is aware that this is going to hit private consumption, except for the essentials of daily life. Who will buy a new car, a pair of new shoes or a handbag if movement is restricted and you are asked to avoid any unnecessary social contact?
If people don’t buy what is being produced, the damaging effects will come, even if somewhat later. It is unlikely that anyone can know what to expect for the rest of the current year. However, it is possibly fair to say that the present situation could have a profound effect on social behaviour and consumer spending in the years to come. At least in the developed world, one would not be surprised if people reviewed their excessive consumption for a while.
In much of Europe the situation was business as usual until the end of last week. This may now change, with all the restrictions on public life. People will stay home, public events are cancelled, schools and universities are closing and this is going to hit businesses. Retail stores, restaurants, entertainment and a great part of the service industry will feel the pain very soon now. Financial support from governments can ease the economic problem, but not the structural effects.
Sales this week were just bits and pieces. What people needed, they bought, but most tanners are now reviewing their stocks and checking their emergency plans. In Europe we haven’t seen much of a price effect yet, but it’s only a matter of time.
The kill: The kill had remained regular, but we are hearing already of the initial influences of reduced demand and negative news from export markets. Weights continue to be very heavy.
What we expect: With the present paralysis and the trend in other parts of the world prices will come under pressure. Let us see how far the beef industry gets with its focus on lower kills and the logic that this means higher prices.
