German Perspective—23.09.08
22/09/2008
What happened this week: Wow, what a week. Although we cautiously tried to express our concerns about the general situation last week we did not expect what we experienced this week. Many people tend to forget, but we have seen market turmoil before, but never so serious and challenging as at the moment.
With a triple crisis (financial, housing and commodity) it is a bit hard to digest all of this at the same time. With banks falling like leaves from an autumn tree, fear has also reached the normal person in the street who has to be afraid that his savings might be gone by tomorrow.
So, most of business has been paralysed with everyone just watching the news and hoping not to be a victim.
In such an environment the little world of hides, skins and leather became even smaller. It was, however not shy to join the party of bad news with announcements from tanneries of production interruptions and closures. Again, it was a great week for anyone who wanted to be depressed. Was there also any normality? Yes, as emotional as things were, there are still productions running normally and in need of consistent and regular raw materials supply. So, some larger trades were concluded, making the statistics look better than real trading activity.
Demand was again fully focused on bulls and ox/heifers, and dairy cows were again left aside with no more than coincidental trades and inquiries. The upholstery market remains in the doldrums and the present problems on the financial markets were another blow.
Consumers will continue to buy shoes, but will certainly think twice in these times before investing in ‘big ticket’ items. This comes at completely the wrong time of the year with the upholstery production season just starting and requiring clear indications and commitment from customers about demand and products to restore confidence in production and outlook in this sector. It seems hard to expect any restoration of confidence if the market situation does not stabilise soon.
The sharp decline in automotive demand is also problematic. The supply chain is jammed for many producers because of sales declines and cutbacks of forecasts for the months to come. Shoe production remains the only rock in the sea and—as a basic demand—may face also some headwinds, but does not look like being hit so hard by the present depression and trouble on the financial markets. Most of our regular clients in this field—and no matter where they are located—are maintainig their productions pretty well and have so far been pretty immune to the headwinds. Let’s hope that this continues to be the case.
Sales concluded this week were mostly on steady to moderately lower levels. This excludes the dairy cow market where nobody knows where the market really is—as the volume of sales cannot actually give a real indication of any realistic market level.
The kill: The kill remains steady and normal for the time of the year. Surprisingly, weights are not really taking off, which is not good news for cows in particular. With the weather still being quite reasonable farmers are still not rushing to dispose of their cattle. This should keep slaughter regular but not really increasing for the short term.
What we expect: We are living from day to day at present and form deal to deal. We can’t really make any forecast as to how the leather market is going to digest the present challenges. We don’t think that we are over the cliff yet. There are still too many structural and financial issues that need to be settled before the normal forces of supply and demand regain command of the market situation. Until then anything can happen and risks run high.
| 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 | € 1,40 | Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,30 | Steady | |
|
Dairy
cows |
15/24,5
kg |
22,5/23,5
kg |
13/22
kg |
20/21
kg |
€ 1,40 |
Weak |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 1,20 |
Weak |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 1,00 |
Weak |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,45 | Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,30 | Steady | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,15 | Weakish | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,00 | Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,00 | Steady |
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