German Perspective—03.03.09
03/03/2009
What happened this week: The market this week entered into what we would call rather chaotic conditions. We are experiencing a situation of complete disorder with little market logic and no rational price orders left. In particular the situation in Europe or, better said, in Italy is concerning. A number of supply markets from Europe have always focused entirely on the market in Italy and Spain, partly because it was so much easier to work there and partly because many origins had, and have, no access to the Asian destinations other than through traders.
With the market situation in southern Europe deteriorating almost daily and no network in Asia, the only option to move product and to generate cash is to dump material on whoever is willing to bid and in a position to pay. This has led to completely insane prices quoted just to find somebody for a load or two and to move stocks and to raise at least a little cash.
This is confirming the concerns that we have been harbouring for quite a long time already, that there are more than abundant raw material stocks in that part of the world for which there is no regular customer base; this will cause trouble when those stocks need to be liquidated. However it is the same old story, that in an undersupplied market more money doesn’t buy more hides and in a weak market cheaper prices do not generate more demand.
It was no great help either when a few market reports came out this week painting a more-than-bleak market picture, but only on the basis of this particular window of the market. On a wider perspective the situation is a bit different or, better said, more fragmented. Looking at the male market, the market for fresh hides and the market for better-than-standard material, then the situation on supply and prices is different. These market segments or suppliers no longer hold large inventories or face insufficient demand. At today’s market levels, production is moving and the supply-demand balance is reasonably intact. There are still concerns, because of the general global economical crisis, but nothing more. Hides are selling on a regular basis and movements are adequate.
It is so far only the ‘no name’ material that is facing problems, and the risk is that these hides could drag the rest of the market down again with them. If leather prices come under pressure again because individual conditions are pulling them lower, we are in for more trouble.
If leather prices fall too low it will actually cause long-term damage to the industry, with much more serious consequences than the effects of the current temporary crisis. Leather as a commodity doesn’t work and that should never been forgotten.
As far as our sales were concerned, we cannot actually complain. Sales were on satisfactory levels; nothing to celebrate, but things are moving. The low kill means makes are no longer a headache, and cows have enjoyed another week of reasonable interest form Asia. This, in combination with the firmer US dollar prices, means things have been just about steady.
The kill: This should have been the last week of extraordinarily low slaughter. Not that we expect a strong rise, but at least a normalisation of the situation.
What do we expect: The situation is getting a bit tricky now. If the market drama in Italy is going to set the levels, we are heading for another round of adjustments—at least for cows. If this is not having too much impact on the global scale we might continue with a well supplied market and moderate price pressure, but nothing more. One way or the other we don’t think it is going to be easy in the weeks to come and the second quarter is not going to be the best one either.
| 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 | Struggling |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,20 | Struggling | |
|
Dairy
cows |
15/24,5
kg |
22,5/23,5
kg |
13/22
kg |
20/21
kg |
€ 0,80 |
Struggling |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 0,70 |
Struggling |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 0,60 |
Struggling |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,05 | Struggling |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 0,90 | Struggling | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 0,70 | Struggling | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,50 | Struggling |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,50 | Struggling |
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