German Perspective—09.06.08
10/06/2008
GERMAN PERSPECTIVE—09.06.08
What happened this week: After last week’s improved performance we wondered if it was just a one-week flurry. After this week, it’s impossible not to be convinced that it was, indeed, nothing more.
The week started pretty well and on Monday and Tuesday one thought there could be some follow-up from the week before. There were a number of inquiries form overseas for bulls, ox/heifers and low grades, the US dollar started to climb and the situation looked pretty reasonable.
On Wednesday things turned and activity calmed down. On Thursday, the president of the European Central Bank, Jean-Claude Trichet, suggested the possibility that interest rates in the euro zone could be raised quickly, maybe during the month of June. This was pretty bad news.
The US dollar erased in a couple of hours all the moderate gains it had made in previous days and the outlook for higher interest rates is certainly not any good for consumers and businesses.
To fight inflation it might be necessary and important in the long run, but in the short term this could become pretty painful for the economic climate and so it did not help that the day before, US Federal Reserve chairman, Ben Bernanke, admitted finally that a weak dollar was not helping the US economy, at least not in view of imported inflation.
Also the news about automotive sales wasn’t good, with the possible exception of small cars as drivers downsize quickly in the western world. Fortunately, the German luxury manufacturers are still enjoying excellent demand from the newly wealthy around the globe so their production performance is still pretty good.
This is also reflected in the consistent demand for good quality heavy hides which are probably the only ones still selling and moving steadily and in sufficient volume. Some people have even started talking about shortages of these hides, but we would certainly consider this to be an exaggeration.
For the rest of the market we cannot report anything positive. There was quite a bit of interest at the beginning of the week in low grades, but that faded quickly and from the inquiries, very little was left and converted into business during the week.
Consequently sales were well down and did not reach anywhere near the weekly averages. The sharp decline in the dollar on Thursday destroyed any final hope for a acceptable finish of the week.
Reports from other markets were no more stimulating. We all knew already that the market situation in the south of Europe was not good at all, but the daily news and reports are deteriorating daily now.
Most consider that tanners’ stocks will easily cover their needs until the summer holidays and there have been a number of reports of requests for shipping delays. Since we are at the beginning of June it is a long time to go until September and it could easily take until October before activity improves.
The main problems are still deriving from the upholstery markets, but there are also some concerning stories from the shoe and leathergoods sectors.
Sales in the end were isolated at about steady levels. However, it is less a question of price than of demand these days and we would not be sure if even prices that were 10% lower would actually stimulate demand at this stage.
The kill: The kill wasn’t too bad for the time of the year and the slaughter mix is favourable, with more bulls and livestock in general coming in a bit heavier than normal for this time of the year.
What we expect: Summarising the situation, you would have to be a dreamer to believe that the weeks to come will be easy. The leather market in general is in difficulty and this is far from good news for the hide market. As we have already said, it is less a price than a demand problem, but if sellers cannot move material, they will start to chase bids and consider prices; this is is only normal.
| 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 |
€ 1,40 |
Weaker |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 1,25 |
Weaker |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 1,13 |
Weaker |
|
| 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 |
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