German Perspective - 28.07.15
28/07/2015
It is still not very easy to obtain a clear picture of the market situation. Several suppliers from around the globe are trying to paint a more positive picture of the market and are reporting better and higher sales and a more comfortable forward position, but actually we don’t think we are there yet. A lot of the documented sales are still re-sales and we don’t think that a full clearance of the backlog that built up in the first four month of the year has been achieved yet. However, there is no question that over the past weeks more business and sales have taken place, which is not really a surprise considering that the production of leather has not stopped and the raw material supply pipeline needs to keep refilling, at least for those who have a safe and stable business with regular customer and supply chain relations. This is, however never enough to clean all the hides up which are produced.
One can still see in the market what we have been discussing for a long time. Where leather is a mere material, it has been replaced by alternatives and this is not going to change very soon. All hopes are now on a general recovery of demand throughout the supply chain when the summer break is over, businesses have digested their high-price stocks and handled the financial consequences and can start again with cheaper prices and stocks. We can hope this will be the situation all the way along the supply chain so that a serious balance and reflection of final consumer demand can be reached by September or October. It is likely that this will happen, but that does not mean it will end in inflated demand and rising prices.
The main concern remains for the lower end of the price and quality range, while the medium and higher side, more representative of the the real DNA of leather production, is far less of a problem. Checking through the price changes of the last months this is confirmed by what has happened in recent months. So far, the largest correction has taken place for low price hides, while the better end has actually seen less of a decline. Unsold inventories have never really been significant and this has given suppliers a far more comfortable position. They have now to deal with the problem of how far they should adjust their prices to prevent their buyers from experimenting with cheaper options and alternatives.
Sales this week have been satisfactory. With the exception of lightweight cows, all categories saw enough demand and interest to clean up the weekly production. With the support of the US dollar, prices were kept almost steady and so one could be satisfied. However, the underlying sentiment with the buyers is not that they are buying with much need or confidence; they just don’t want to miss anything. No buyer was taking big quantities and it needed many contracts to reach the total sales number. We are quite happy with the way things are because it means that risk is spread too.
The kill: The kill remains very, very low and farmers are extremely unhappy about the situation. Milk and cattle prices have come down and do not meet their expectations. There is not much change in sight, at least not until September.
What we expect: With European tanners now disappearing the next three or four weeks all will depend on demand from Asia. Actually we don’t think much will happen on the buying side, but it is also unlikely that sellers are going to move their prices by much. They will take a break too and most likely wait for the general assembly of the trade in Shanghai.
| 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 | € 2,40 |
Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2.00 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ n.a. |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,90 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,70 |
Weakish | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € n.a. |
Weaker |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,10 |
Soft |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,00 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,55 |
Soft |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € n.a. |
Soft |
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