German Perspective - 7.10.14
07/10/2014
The other markets were not too active either and it seems that people are not yet ready or willing to take a decision about business for the upcoming season. This is mainly reflected in the stiff resistance against the asking prices and the limited volume clients are willing to take, which is reflecting the hand-to-mouth buying policy most tanners are displaying.
Buyers are also very carefully picking what they buy and it seems everyone is trying to avoid any inventory which cannot be used up right away.
Cash flow remains an issue and one spends a lot of time collecting money these days. This is not a normal October, when tanners are usually starting their busy period. One can only hope that it might still be too early and that it takes off after the holiday in Asia.
However, fundamentally, one gets the impression that leather demand is less than was expected in August and orders are not for all grades and price levels. Business seems to be hand-to-mouth and neither sellers nor buyers are willing to give clear positions for the longer term.
This seems representative of the leather business in general: Volumes are unclear, the outlook for economies is uncertain, margins are tight or non-existent, finance and cashflow is difficult, the beef industry is rigid on its by-product revenues and leather substitutes are getting cheaper - not really an environment for easy decisions.
The core leather business is continuing, but there is a serious lack of confidence around and this means everything is short term, and risk aversion is the core driver of business. For several years there has been the consensus that leather demand is outpacing supply on a long-term basis. That made people willing to take long-term commitments and they did not worry when calculations did not work out here or there. This strategy has had some cracks since spring, despite the fact that raw material prices did not move much lower. This was, however, more relating to the pricing strategy of the suppliers than a real reflection of demand. One need only to look at the price trend of splits, goats and nappa lamb/sheep to see that there has not been any real shortage of raw material.
Bovine raw materials were kept high and this began to reduce physical demand for leather. Whether this is a trend or was just temporary will be seen as the leather season proceeds.
Selling this week was pretty hard work. Although we have the support from the currency it is not easy, and discussions about a trade which used to take a day are now taking a week. We are taking positives that the currency is balancing a lot of issues and that other markets are more expensive so a decent amount of the demand is still ending up with us.
Prices were on a weak-steady and here and there levels had to be trimmed down to get the deal done. Not accepting the customers’ proposals generally meant losing the deal.
The kill: The kill was curtailed by a day this week. Apart from that, we still face pretty warm weather which is keeping cattle in the fields. The kill is at normal levels with weights for males high and for females extraordinarily low.
What we expect: It is unlikely that much will change in the coming week(s). The wait-and-see situation is dominating and so far there is not enough pressure on either side to take any fundamentally different decisions. Regarding prices, we are still well sheltered by the competing origins and the currency trend, and this offers us extra time.
| 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 | € 2,45 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,10 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,30 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 2.00 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,85 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,30 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,30 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,15 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,80 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Steady |
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