What happened this week: The last weeks before the year ends are following the usual pattern. There is still quite a lot to do and many things to organise before the break, such as trying to resolve all the issues around transportation and shipping and to sort out the weird situation around the extra-heavy hides.

The pandemic continues to be one of the dominating factors. On the supply side, corona cases along the beef production chain are bringing new challenges. These include the uncertain strategies of politicians on how to deal with the pandemic until a broad-base vaccination is possible, and the analysis of how leather demand will develop in 2021. Both of these are making business life a real challenge. Maybe it’s also the fault of complicated thinking. Maybe those who are just living for the day and the next deal have a much easier time.

People in the trade all over Europe have been scratching their heads on hearing the price ideas that packers are quoting for premium heavy males. Industrial automotive tanners and the key players in the beef industry seem to be living on two totally different planets. It is less a question of supply and demand than a question of pricing. The heavier the hides get, the more bizarre the situation.

What triggered this is unknown, but the fact is that somebody has decided that now is the time for a major increase in the price for heavy male hides for a particular use. There must be a strong belief somewhere in the beef industry that tanners are suffering from a serious shortage in supply and can now be forced towards the price levels somebody has set as the next target.

This works like a bushfire fuelled by strong winds. The lighter the hides get and the more females come into the mix, the less pronounced the trend is. The particular hides that are dependent on exports to Asia and are, consequently, sold in US dollars and need a shipping container to get to that destination, are subject to a more sober price discussions. The US dollar continues to fall against the euro and shipping continues to be a major headache in terms of the cost and availability of equipment.

All of the above has triggered intense discussions between buyers and sellers, with both sides trying to figure out the truth. Tanners in particular fail to understand where the sudden optimism from sellers is coming from. Many sellers are trying to play the supply card, not producing sufficient quantities to satisfy the industry’s appetite. What is certain is the fact that even if there really aren’t enough hides, more money is not going to mean more hides. 

We might still be in a period of refilling the pipeline, but we are certainly not in a trend in which leather consumption is on the rise across the board.

Business this week was reasonably active as far as the numbers of bids was concerned. However, the weak dollar and the rising transport costs have made it difficult to book sales in. The price gap between the ideas from Asia and the abattoir realities here make sales extremely difficult. A handful of smaller orders came in and the focus of interest has now shifted from females to males, with the assistance of the firm position of US sellers. European buyers remain cautious and can stretch purchasing due to the holidays ahead.

The kill: The kill continues to be at the seasonal high levels. Weights remain heavy. Supermarket prices for beef are quite attractive and sales seem to be compensating for some of the losses from the restaurant business.

What we expect:

 It seem that we are now preparing for the final shoot-out between the large abattoir groups and the automotive tanners. The positions are far apart at the moment and no one seems willing to surrender. We could be into 2021 before real decisions are taken. The rest of the market is stable and suffering from the currency situation.

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