This week: The beginning of May traditionally marks the start of a quieter period in our business. Holidays, a wait-and-see attitude among many market participants and the usual summer slowdown in consumption and production are beginning to leave increasingly visible traces.

This cannot be generalised completely, as some supply chains are still functioning more or less normally. Fundamentally, however, the market mechanisms and seasonal patterns have changed very little over the years, and this year is once again showing a very familiar picture. The market is not coming to a complete standstill, but its momentum is clearly slowing.

It remains clear that the weakest part of the market is Europe. Elevated energy prices, geopolitical conflicts and the uncertainty associated with them are weighing not only on consumer sentiment, but also on the planning security of companies and consumers. The fact that the situation on the consumer side is continuing to deteriorate is also reflected, among other things, in another insolvency in the German furniture industry.

From the various centres of leather manufacturing in Europe, the feedback remains almost exclusively negative. Order levels are still well below average, and in many areas there is hardly any noticeable revival.

The only sector apart from the niches that continues to account for a substantial share of larger productions is the production and marketing of semi-finished products. This segment is still absorbing a notable portion of the raw material, while almost all other sales sectors are significantly underperforming.

In Europe, and particularly in Germany, the main focus at present is less on short-term market movements and more on the fundamental structural changes in the supply chain from the slaughterhouse onwards, which we have already reported on several times in recent weeks. Even though the key decisions are now more or less publicly known, their actual effects will only become visible in the coming months, possibly even not until next year. At the moment, it is still merely the information about what is expected to happen, but not yet the full practical effect of what will happen. What consequences this will ultimately have for the many parties involved cannot yet be reliably assessed from today’s perspective.

This past week, too, the level of demand and actual business activity remained very limited. Interest from Asia was once again particularly quiet and also the currency movements did not support sales. From China and from the traditional tanning centres that usually show interest in European cow hides, the signals were essentially negative. Reports pointed to a weak order situation, cautious buying interest and further declining prices for splits. As a result, sales volumes this week were once again below average and were largely limited to individual specialties and special transactions. However, this had only a limited impact on the general price level, as no real effect on prices at the slaughterhouses or in the markets can currently be observed.

The kill: Slaughter and the meat market are in a similarly difficult situation to the market for by-products. Prices for live cattle continue to fall, while meat sales remain unsatisfactory. Of course, seasonality also plays a role here, as spring and summer are traditionally not the strongest demand periods for beef in this part of the world. At the same time, however, the consequences of the past months are now becoming more visible. Live cattle prices were very high in the first months of the year, while slaughterhouses were nevertheless looking for capacity utilisation. It is possible that too much was slaughtered during this phase, meaning that larger quantities of beef now appear to have to be placed in cold storage facilities, as they cannot currently be sold in full. Accordingly, the brakes are now being applied, and the familiar accordion effect in this market is once again taking hold.

What we expect: At present, there is hardly anything to be seen that could lead to a short-term change in the market situation. An actual resolution of the geopolitical conflicts would, of course, significantly improve the overall mood. However, the damage already caused by the various conflicts, as well as the high level of uncertainty that has resulted from them, is unlikely to be reduced within just a few days or weeks. Even so, peace in the Middle East and possibly also in Ukraine would certainly trigger an initially positive reaction among consumers and companies. However, we do not expect any major price changes in the coming week either.

Price Table

Share this story: