German Perspective – 31.07.18
31/07/2018
For those still willing to discuss the hide market the main question is what is going to happen to automotive tanning and the related hides. The trade war between the European Union and the US has been suspended, but nobody knows how long this will last.
Those slaughtering the heavy, automotive-type cattle were immediately celebrating. They take the lower kill and the lifting of concerns over tariffs as signs of another favourable market for them. Some even went as far as declaring that the small price reductions they had to accept over recent months should be erased and prices set back to the levels from the first quarter of the year. From their perspective, the record sales and results of the industry in the first half of 2018 justify every attempt to put pressure on once more. They seem to have ignored the production cuts that have been announced, especially those by the Volkswagen group for the period after the holidays.
For the tanning industry, the problem of lower split prices and higher production cost remains an issue, along with the problematic return mix of the different selections. If the prices and the demand for lower selections in the automotive industry continue to decline, the mix doesn’t fit because all heavy bulls are only producing top selections. The substitution of lower quality leather in a car is a reality, even if some people don’t like to hear it. However, this is all for after the holidays. For the moment, there are few discussions about hides. We will know more in September.
The spotlight of the business, which had been so much on Europe in the second quarter, is now shifting back to Asia. This is due to barely anyone talking in Europe, but also because the Chinese buyers who had been sitting on the fence observing the market have begun to move. They have employed the expected strategy; buy volume at low price. We don’t know how successful this strategy was in general, but in our case the ratio appears to be 10:1.
In the dairy cow segment, the price is just one aspect. The strategy of buying based on social media information has its limits and can become quite difficult to handle. WeChat says heavy cows are better than light ones. WeChat says supplier ‘A’ has huge claims and that you should not buy from him anymore. WeChat says the same supplier has sold fantastic heavy and extra-heavy dairy cows at very attractive prices. If WeChat says this is true, it must be and we all have to ask for the same.
In the time of messaging groups and social media it has become easier and easier to spread ‘fake news’. Experience and knowledge counts less and less and professional, competent and experienced individuals deciding by themselves based on analysis is becoming increasingly rare.
In the end, we possibly had more inquiries and bids from China in the past 10 days than in the 10 weeks before that. However, under the bottom line little of it made sense, as cherry picking around the edges is not a viable business concept. The natural conditions mean that hides are lighter in summer and heavier in winter and the grade mix is what nature dictates. We don’t know how our colleagues are dealing with the situation, but we have been very selective with sales and with customers. This means that although the numbers were better than they have been so far this summer, they are still not good enough. The prices for hides sold were steady.
The kill: The drought is becoming a worry. Cows are giving less milk, there is not enough feed, and there is no real change in sight. Another two weeks of similar conditions and the problem will become serious. It could end in large slaughter when farmers are forced to sell cattle.
What we expect: We believe the next two or three weeks will be decisive. The appetite has been shown but the size of the hunger is unknown. Will it be sufficient to clean enough hides to stabilise the market until September? Prices across Europe vary widely and need to be synchronised once more.
| 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 | € 2,10 |
Stable |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,10 | Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,95 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,85 |
Weak | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,75 |
Weak | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,60 |
Stable |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.65 |
Stable |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.55 |
Stable |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € n.a. |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,85 |
Steady |
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