What happened this week: We have had an uneventful business week. Ski holidays, the carnival period and the Lunar New Year in Asia have all had their share in keeping a large number of players away. Consequently, the number of inquiries was small and only a few sales were concluded. Most of the significant activity surprisingly came from Asia, where most people had their phones off last week. Bids were below asking levels but some dairy cows sales were eventually concluded and the right timing in the currency market made prices almost right. The continental European hide market was paralysed by the endless negotiations at the abattoirs. Butchers have assumed a strong position and thrown the lower slaughter into the ring for isolated tanner activity to seek direct deals. At the same time, processing margins are squeezed by higher cost and lower hide weights and leather prices are falling whilst the cost of chemicals and energy rising. All this is hindering tanners’ calculations so they are desperately trying to lower the raw material cost. The European raw hide of average quality is, consequently, carrying the highest risk potential, as it is threatened by cheaper origins, mainly from America. The top quality end, or rather what remains of it, is less affected because the real luxury and specialty market is still in decent shape. Many in the European hide business are confident that the market is going to improve after the Asian holidays. Yet the nature of the improvement is uncertain as, though activity will certainly increase, it is questionable whether it will translate into higher raw material prices. As long as leather prices cannot be turned around it is hard to believe that tanners are so desperate for average quality hides that they would consider paying significantly higher prices in the dollar. It is hard to find an argument that would justify a rally in raw material prices with no new volumes for upholstery leather contracts requiring negotiations at the moment. The main statement from the optimists is that the kill will fall towards the second quarter. This may only be a local argument yet last year we witnessed how a reduced regional offer can be swiftly replaced by other origins, from South America in particular. If the optimists are right a substantial increase in leather orders will be required, forcing tanners in the raw material market to keep their market share. However, it is unlikely in the coming months that higher demand will be accompanied by higher prices.
The kill: We are completely on track. The kill remains reasonably steady and only marginal and regional variations were noticed last week. The kill of bulls fortunately remains better than expected for this time of the year, but hide weights are lower as animals are being killed more for the subsidy than due to being truly market ready.
What do we expect? In our opinion the market continues to remain in the same narrow price band that we have now seen for quite some time. Price variations may be triggered by currency variations but nothing else can really influence the market at the moment. A sense of speculative tension is on the rise yet we do not expect it to affect prices in the short term.
|
Type |
Weight range |
Avg. green weight |
Salted weight |
Avg. weight salted |
Price per kg green weight |
Trend |
|
Ox/heifers |
15/24.5 kg |
22.0/23.5 kg |
13/22 kg |
20/21 kg |
€ 1.45 |
Steady |
|
|
25/29.5 kg |
27.5/28.5 kg |
22/27 kg |
25/26 kg |
€ 1.35 |
Steady |
|
Dairy cows |
15/24.5 kg |
22.5/23.5 kg |
13/22 kg |
20/21 kg |
€ 1.40 |
Steady |
|
|
25/29.5 kg |
27.5/28.5 kg |
22/27 kg |
25/26 kg |
€ 1.27 |
Steady |
|
|
30/+ kg |
33.5/35.5 kg |
27/+ kg |
29/31 kg |
€ 1.18 |
Steady |
|
Bulls |
25/29.5 kg |
27.5/28.5 kg |
22/ 27 kg |
25/26 kg |
€ 1.50 |
Steady |
|
|
|
