German Perspective 27.05.08
27/05/2008
GERMAN PERSPECTIVE—27.05.08
What happened this week: After the huge volume of business and sales from September to March this year where it seemed that it would never stop—with overtime and excessive work for the organisations—we are now seeing quite the opposite since April.
Business is slow, shipments are drying up and business is at the minimum one could expect for this time of the year. Fortunately the kill is not the same as during the winter months.
Now one could be of the opinion that the leather business is dull and below standard, but this is only half of the story.
The situation in Europe is certainly not brilliant in many regions, but globally leather demand remains quite reasonable. As much as the export numbers form the US are questioned, but there is no question, that if the prices is right the hides still find a buyer—every week. And this is the crucial point for the European supply of hides in the standard quality range and here in particular for our German material.
Despite all the warnings given already in the first quarter, that the sharp decline of the US dollar and the price policy of other markets would disqualify the product on the global market, abattoirs and hide buyers were not willing to see the writing on the wall.
As a result the necessary adjustments were not made, butchers were happy and the price level of our hides slipped slowly but surely away from the international market levels. Tanner demand shifted and week by week market share in the overseas markets was lost.
The simple reason for this is that most players in the hide market are still too easily impressed by market share rather than the analysis of the fair valuation of hides in the world marketplace. Maybe they are not capable of this.
With in particular the upholstery market suffering and European steers not being the first choice overseas, the hides that had been moving freely in 2007 are now not finding enough homes, and the balance between kill and use of the industry is not there any more.
The shortlived recovery of the dollar did not help much either and, in the meantime, the greenback has slipped back to the low side. Sales and business during the week were again rather coincidental, although we have to admit a fraction better than in the weeks before.
Interest was spread all over the markets and the isolated sales went through for different types and grades. No specific interest was dominating. A holiday on Thursday in some Catholic areas also cut the weekly activity down.
Prices in Europe were more or less stable, while the weaker dollar was weighing on the revenues again. Letter of credits are still coming in more slowly than normal and the shut-down of many tanneries in China due to the Olympics and the effects of the terrible earthquake in that country can also be felt. The general mood about the financial situation of many tanneries in Europe is also particularly good and credit insurers are monitoring the sector with great intensity.
The kill: The kill remains steady and at normal levels for the season. The holiday in the south has cut production a bit this week. The seasonal decline of hide weights is now in full swing and weights are rapidly falling at the moment. Weather in our area is still fantastic, which will not support beef consumption for the time being.
What we expect: In the end we have only two options. Either the leather business is strong enough to support higher prices from other origins or our market has to adjust to regain market share against the alternatives. We fail to draw any positive scenario for the time being until mid-summer and we are also quite sceptical about the idea that lower prices would immediately generate a sharp increase in demand as most global productions seem to be well covered until August.
| 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 | Soft |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,33 | Soft | |
|
Dairy
cows |
15/24,5
kg |
22,5/23,5
kg |
13/22
kg |
20/21
kg |
€ 1,45 |
Soft |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 1,30 |
Soft |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 1,15 |
Soft |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,48 | Weaker |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,35 | Weaker | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,21 | Steady | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,05 | Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,05 | Steady |
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