What happened this week? Like everybody else we would love to return to normality. The question remains if the how the new normality will compare with the old one. Some people still believe they will wake up one day and find it all was just a nightmare. Most people however are getting used to the situation and the discussions about future business are beginning to intensify. It seems to be pretty likely that the leather industry will have to undergo serious changes.

We have to accept that global leather production which had already been under a lot of stress will be affected and it may become a question of survival of the fittest or smartest. Many have forgotten what it is like when your customer is not able to pay. We are still at the very beginning of the cycle and so far it just has been a lockdown and a dent in production
Depending on the country, companies are getting help from the governments either by direct cash injections or by cheap credits and loans. This does not solve the problem of possible contracts lost and missing orders for the future. Without a solid base of business in volume and margin a company has no potential to survive in the long run.

How long the financial injections are going to be offered and who is being rescued, nobody knows. The option that some companies will fail eventually is a realistic outlook.

In the meantime we are dealing with two major parameters. On one side the beef business a pretty has been hit and slaughter has dropped by about 20% below normal levels. The second quarter in Germany is usually the lowest production period during the year. The short-term outlook is not positive despite the fact that animals which are ready for slaughter will have to be slaughtered within that timeframe. Selling hides this week would have been possible and maybe even in large volume if people were willing to accept the prices the Chinese tanners were offering. We were not able to sell much, because the prices were simply too low. 

In Europe the regular buyers were taking the regular volumes at approximately steady money. Italy was said to be back in the market for limited quantities and possibly a fraction higher in price than the lows that had been quoted since they had to close their factories. It was limited, however, because several old contracts were still in the pipeline and had to be delivered. 

The Kill: The outlook for beef consumption and slaughter remains negative.  

What we expect: The real picture will not be clear until the end of this month. Until then it’s a guess.

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