This week: Prices at the abattoirs have overtaken the market realities. The beef industry realises that, with a lower kill in the peak production season, they run very little risk that hides will remain unsold. Processing units have to cover their forward sales and need material. This leads them into a highly competitive situation and the moment they decide it is time to look for extra supply, an explosion in prices is guaranteed, even if this is decoupled from commercial logic.

This is not new, but it is further evidence that the system refuses to learn from the mistakes of the past. The key question in these situations is not so much why it happens, but rather how long it is going to last. This depends on the supply side. The demand and requirements of the key customer base in Europe will not  change much in the coming weeks or months. The level of production will not change much until spring and this means that the demand from those tanners that are dependent on fresh hide supplies will not lower their activity by much.

Selling prices are pretty stagnant outside Europe and sales price increases after the last round of steeply rising abattoir prices are not sufficient to cover. This, coupled with higher shipping charges, generally rising costs due to the covid-19 and a weak US dollar do not augur well. 

The weather was also a factor this week. Heavy snowfall and freezing temperatures have caused major trouble for transport, not only of hides, but also for cattle. Covid-19 outbreaks here and there can also affect production numbers in tanneries as well as in meat plants.

Asian communities closed for the Lunar New Year holidays. Agents were asking routinely for offers, but did not come back with anything really inviting in terms of price. In any case it is fair to say that the holiday silence from China, which we have seen so often, has come less and later this year. 

The dynamic of demand and a strong position in price negotiations has faded and the toppy market in the US is not helping or supporting a strong price position in negotiations with Asia at the moment. Only a surge in demand and rising prices overseas will sustain the present market. Sales for this week were almost entirely focused on Europe. Male hides were once again the ones that attracted most of the attention.

The kill: The kill was low. In normal years we would excuse this by the carnival week, but this cannot really apply this year. Farmers feel that they are (correctly) not receiving fair compensation and the weather adds to this. For next week not much change can be expected.

What we expect: Next week the concentration will be on European clients and how they deal with the situation. What has to be bought will be bought, but it is unlikely that this will amount to much. We don’t see that Asia will return quickly and with great ambition and so everything points towards another quiet week with everyone trying to figure out what to expect for the month to come.

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