German Perspective 03.06.08
02/06/2008
What happened this week: Finally some better news. After the uneventful and boring we have seen since mid-April this week has finally brought more activity than we have seen for a long time. There are no obvious reasons, but demand gained a lot of momentum and already by Wednesday more hides were sold than in any of the previous six weeks. Sudden interest from various parts of Asia and the decent recovery of the US dollar helped a lot.
Although there were sales of a bit of everything, but the main focus was definitely on ox/heifers and low grades. Cows were again at the bottom of the sales list, but at least they were on it for the first time in many weeks.
It will be interesting to know in the weeks to come if this was just a short-lived flurry or a moderate change for the better. With a strong performance in the US market and a better outlook for the dollar, prospects are becoming a bit better, although it is certainly much too early to already make a final judgment.
The general mood in the trade is still not very positive and there are still more concerned than hopeful people, and there are many good reasons for this.
However, after a pretty bad second quarter so far, abattoir prices were not reflecting the global trend of hide prices. The resulting sharp fall in sales into overseas markets might have brought the final lap of the negative cycle. But if the cycle of rising commodity prices and a falling dollar is coming to an end, the prospects for our hides are definitely improving.
Despite the problems in the US and European retail markets, global demand for leather products is still increasing. Looking at the outstanding sales numbers in the US and the reduced kills in South America and Europe, interest in European hides could rise again and restore the market balance, subject to achieving price-levels that are finally fine-tuned to the international market levels.
However, all of this will depend entirely on the markets in Asia, since the European industry is now rapidly winding down and preparing for the summer break and the annual holidays.
It seems that there are few inventory gaps still to fill except the regular ongoing programs. Depending on the area, production will shut down between mid-July and end of August.
How difficult the situation in the industry in Europe has become was clear from the news Natuzzi had to publish this week about its 2008 results so far. It is easy to imagine the effect on suppliers and their own production of leather and it is most likely that other manufacturers in the country are facing similar problems too. It is another clear example of how much the leather upholstery business and its suppliers are struggling in Europe at present.
Prices this week were entirely steady with fractional increases for extra heavies and some here and there produced by the daily currency movement. However, market prices still don’t match the abattoir levels, which are presently also negatively influenced by the lower hide weights.
The kill: The kill was somewhat better this week. We have no idea why, as neither the weather nor the time of the year would justify any rise in slaughter levels. The next weeks will tell us if it was coincidental or if the slaughter numbers are moderately higher this year in spring.
What we expect: Despite the positive indications, we remain very cautious about the situation. The time of year, the problems in the European industry in general and the inconsistencies in the overseas markets are not making us believe in any short-term benefits for the market. The road over the summer still looks pretty bumpy to us and only a sharp rise in the value of the dollar could help.
| 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 | € 1,22 | 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 |
Share this story:
