German Perspective—11.11.08
11/11/2008
What happened this week: As we expected, this has been a pretty quiet week. It seems that the economic problems are now finally reaching everywhere throughout the supply chain and this, in combination with general fear, is resulting in more reluctance on the part of tanners to replenish their stocks than we saw even in the weeks of the highest emotion during the financial crisis.
Although the international stock markets are settling, the currency market stabilising and the presidential election in the US over, this hasn’t really led to more confidence in the tanning industry. Hide prices have fallen pretty steeply and raw material prices are certainly no longer the key problem of the industry.
Despite all this we are seeing still buyers with little confidence and manufacturers who think that cutting productions is the answer to everything. Cash is today the most important thing and with the media and other ‘authorities’ falling over each other to predict a global recession for 2009, most people believe that doing nothing is the best response to all problems at the moment.
Well, this is certainly not the case because, at the moment, what we are seeing seems to be a bit of the classical cycle of a swing from over-excitement to depression. Six month ago the world still seemed to think that the sky was the limit, whereas now many of the same people believe that it is the end of the world.
As usual none of this was or will be true; there will always be better and not so good times. The market exuberances are just a mental issue, with the majority losing rational control.
So, we are at risk of falling from the hype right into deflation and depression—which is something that the current situation does not justify. Although we have declines in consumption, the world hasn’t come to a stop and as more time passes, more people will return to their normal routine.
A lot of money that was going out of the door as recently as six months ago owing to high oil and other raw material prices is now back in the consumer’s pocket and if consumers weren’t so set on becoming more and more depressed every day, they might consider spending again.
For the hide and skins business it means that most tanners are just in process of reducing stocks and production, following the cycle. Only a handful have the money and the courage to go against the cycle and these few were the only ones bottom-fishing this week.
The focus of their interest was again entirely on male hides for the shoe industry. The cow market remains under severe pressure not only because of the agony in consumer markets, but also because of constant and almost daily reductions in the credit cover European tanners can secure.
No insurance limit means in most cases either no supply or cash before delivery, which leads to problematic cash situations. In addition to the lousy demand for upholstery hides, this additional problem is another big obstacle for the market.
Sales this week were limited to some sizeable deals of bullhides to some of the ‘bottom-fishers’. Well, with some smaller price concessions, at least the weekly production could be moved along in terms of the numbers, and as long as the US market is still defending itself against the economic decline, some of us in Europe are stealing the chance to grab what is available in the market.
The kill: Well, nothing is normal this year. While everybody is expecting the heaviest kill of the year in the first weeks of November the slaughter numbers declined again sharply this week and are easily 25% below normal average. This is not a big problem in the present market conditions, but as to the reasons for this, we have no idea.
What we expect: It seems that we are only starting to see the real effect of the turmoil of the last weeks on production. Adding the Christmas period and Lunar New Year break, we will have to remain pessimistic on the market until 2009. Only if the emotional issues are solved will we have any chance of returning to something more normal. Otherwise, the situation will continue to be pretty difficult.
| 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 | € 1,30 | Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,20 | Weakish | |
|
Dairy
cows |
15/24,5
kg |
22,5/23,5
kg |
13/22
kg |
20/21
kg |
€ 1,30 |
Weak |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 1,15 |
Weak |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 0,88 |
Weak |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,40 | Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,20 | Steady | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,00 | Stabilizing | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,80 | Weaker |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,85 | Weaker |
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