Osterhorn,
Friday, 16.07.10
Market Report

The US $ in EURO
1,2950


What happened this week: The main event of the week was the sliding USD. What was helping exports and business until some weeks ago has now truned again against the exporters and when we believed, that Germany hides were already overvalued for a while than they are definitely today. For the international standard products such as dairy cows, heifers and bulls up to 40 kg we consider the prices today to be at least 10 to in some cases as much as 15 % away from the market levels. This has nothing to do with the demand. Except upholstery we see most anneries still working full and in particular the hype in the automotive industry and the steep fall of the EURO value until mid June had offered many the impression, that the prices for German hides had found one direction since 2009 and this would be an never ending story. Apart from a pretty shortsighted market view of a number of players hardly anyone is really making a fair value analysis and the deal of the day camouflages for them the real situation and the question how the market is going to move. Unfortunately the German market suffers also from political moves at the abattoirs and this has also the effect, that players are ignoring the market facts. It is far more important to get hides at this moment rather than how much they cost. Low kills and the news about the fantastic export business of the German car industry made and make people still believe, that this is just a limited summer pause and not a break of the trend. We pretty much doubt that, because it would consequently mean, that alternative origins would need to rise by the equivalent valuation gap and this means 10-15 %. With the stiff resistance we see all over to break the magic marks such as USD 80 for US steers hasnt been succesful so far. Talking to many tanners we get the same story told for a number of times. Shoe, leathergoods and automotive tanners are not complaining about orders and production levels, but the vast majorty summarizes it pretty simply: More production, creates more losses! For upholstery tanners the situation seems to be different in that respect, that they do not have the choice if the could or would possible prodcue less. For them the hides are too expensive and the orders not enough. The results are in any case the same and the question is just for how long and how much of the monetary reserves possibly built in 2009 one is willing and in the position to burn to safeguard the business now. Fundamentally another proof, that larger profits in the leather pipeline are rather borrowed than made. Being more or less  midway of the year 2010 and having reached raw material price levesl which are reasonably high the industry has become pretty cautious about the next six months. While some belive, that sufficient leather prices will be obtained and support the raw material market are others more questioning the general global recovery and believe that rather more that the boom of the recovery after the deep crisis is now rolling out, demand is going to fade, the huge governmental stimulus programs are either ending or loosing their effects and consquently raw materil prices will rather adjust on the downside to the consumer price realities. All of it is at the end the question if somebody favours the inflation or deflation theory which are discussed in the media and in between the economical scientists. Both of them do not help anyone in the trade when he has to take short term commercial decisions. Although trading and demand was light this week and it needs weekly more effort to convince buyers to act

the market as such is still safeguarded by the low production and the pretty empty warehouses. So far all hides which were produced were sold and neither were tanners backing totoally away from the market nor were sellers brave enough to hold on to stocks in the second quarter. This was keeping the first stages of the pipeline pretty well cleaned up and suppliers are - from the inventory position - pretty stressless into their summer vacations. This does however, still not mean that the hides trade at sustainable levels. Business during the week continued to be rather spotty. We find it increasingly difficult to obtain asking levels and  so we surrendered were we found it advisable  and accepted moderate price concessions. There was no broadbased interest and so we had to take some isolated decisions for reasonably  limited volumes of cows and bulls. The kill:  Well, we had a pretty long and cold winter and it seems now, that we will be rewarded with a pretty hot and hopefully long summer. Temperatures remain very high and outside animals are set to suffer from sunburn this year. The kill is terrible and this Friday a number of slaughterhouses have even decided not to open up. Holidays, the hot weather and poor export business are causing buthcers a lot of trouble too. The weather forecast remains good and the holidays just started, so little can actually change things now. Supply will remain pretty poor. What do we expect: Well, as one can get from the above our enthusiasm remains limited until we will see higher leather prices or competing raw material origins showing a very strong price performance in the near future. Currency will remain a strong factor, but from the demand side we dont expect anything supportive for our market  at the moment. Since the supply is also low the lethargic market will most likely accompany us for some more weeks.






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 € 1,90 Steady
  25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 1,75 Steady

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ 1,70

Weakish
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1,45

Weakish

 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1,30

Weakish

Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2,00
Pressure
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1,90
Pressure
  40/+      kg 45,0/48,0 kg 34/+   kg 38/40 kg € 1,70
Steady
Thirds 15/+      kg 25,0/27,5 kg 13/+   kg 24/26 kg € 1.10
Weaker
Thirds bulls 30/+      kg 38,0/40,0 kg 24/+   kg 33/36 kg € 1.20
Pressure





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