This week: Tariffs came, as announced, and left just as quickly, with the exception of tariffs on imports into the US from China. 

The consequences of this are extremely complex, which is probably the reason why US president, Donald Trump, was able to let things get as far as they have. The world is a bit more complex than a pistol-duel on a dusty main street in a US western.

We have to live with it as it is. Because it is so complex, it takes a little longer to come to a conclusion, especially as we still don’t know which metaphysical inputs will influence decisions in the near future. First of all, however, it has paralysed the hide market as far as overseas markets are concerned.

For now, the dispute over tariffs has been reduced almost to a bilateral issue between China and the US, but the consequences will ultimately affect the entire global market structure for the leather supply chain.

Within the week, everyone interpreted the situation in the way that suited them best. Until the tariffs were put on hold for 90 days, fear prevailed in Europe. Then there were those who believed that the frozen business between the US and China could stimulate demand for hides in Europe. For the majority of raw materials, it is hard to agree with this view, because with or without tariffs, US hides will still have to find a market, and with around one-third of the volume going to China, this means that prices will either have to be adjusted for the tariff or alternative markets will have to be sought that promise better returns. It is undisputed that, if this happens, it will put pressure on world market prices for similar hide types.

At the moment, however, it must be assumed that all other alternatives, such as bypass routes, will also be scrutinised. However, one thing must not be overlooked in the whole discussion. Basically, the price will continue to be determined by the total demand for leather and the supply of cattle hides, and the situation has by no means improved. Companies and consumers are currently very unsettled by the trade disputes. It will probably take a few more weeks before this is reflected in the valuation of hides and a stable basis is found again.

For the time being, prices in Europe have not yet changed fundamentally. There has even been some demand from overseas for individual specialities. However, the further weakening of the US dollar is also having a corresponding effect here. It can therefore be said for last week’s business that the volume was manageable and that prices fluctuated between stable and somewhat weaker. However, we do not believe that this is really indicative of the realities of the future, as there is simply not enough reliable information about how the trade disputes will develop.

The kill: The kill is still well below the average figures for the first quarter. Next week we have the long Easter weekend and traditionally this is not a time for high beef consumption. It is also noticeable that the average weights have fallen significantly. This has happened too early for the time of year and indicates that farmers are prepared to part with their animals early given the good prices. The fear of a further spread of foot-and-mouth disease in Europe may also be playing a role in the decisions. The next two weeks will each be reduced by one production day and therefore the quantities will be reduced accordingly over the next few weeks.

What we expect: As in the previous week, any forecast would be pure speculation. Basically, things are not looking particularly good. The leather industry was already in a difficult situation before. The high level of uncertainty and the importance of the US market for leather products will have to leave their mark in one way or another. The longer the uncertainty lasts, the longer the dispute between China and the US will weigh on our markets. We are at the beginning of the weaker production period of the year anyway. The outlook for the coming weeks is therefore not particularly rosy.

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