Market Report 21.07.2023

Osterhorn, Friday, 21.07.2023

The US $ in EURO: 1,1140

What happened this week

The week was completely divided. In Europe, we are now really in the holiday phase and only a few contracts remain open, which will possibly cover deliveries into September. However, it must of course be taken into account that there will be more or less long interruptions in August. The European tanners are demonstrating an almost historic composure. Rumours that there are larger slaughterhouses already announcing rising prices for the period after the holidays are met with incomprehension on the one hand but with a certain ignorance on the other. They look at their order situation, and in the end, it speaks for itself. They realise that they have to buy what they absolutely need, but if they think ahead, it is already clear today that without a significant improvement in the order situation, the pressure will probably be on the suppliers again in the last quarter. Of course, one still wonders what could already be driving some people to build up such scenarios today. Whichever way you look at it, you always come to the same conclusion that it has to be the protection and defence of stocks along the supply chain. In the end, this concerns everyone and also applies to many tanners worldwide. However, it also means that without a significant upturn in leather demand, there is no solution. Raw material prices have had very little impact on demand for some time now. That was the negative part and the impression one took away at least from the talks in Europe this week.

In Asia, the week was much better. The interest came mostly from tanners producing higher quality furniture leather. It remains unclear how leather orders are doing and whether customers really have positive expectations for the rest of the year. Nevertheless, one increasingly gets the impression that Asia has been again waiting for the holiday season in Europe, certainly in the hope of being able to push through lower prices once again. Obviously, this failed almost everywhere and resulted in a really intense struggle in the price negotiations. Sometimes it went back and forth for days and all known tricks were tried to get the bidding price accepted. In the end, it was like so often, either you wanted to sell, you had to say ‘yes’ at some point, or you put things off for the future. Basically, you can say that it was almost always US $ 4.00 per piece that separated us from the ideas of the customers in China. In the end, as so often, the truth lay in the middle and still neither side is really satisfied with the result. This is especially true for us, because the US dollar puts an extreme strain on revenues. Now everyone has the opportunity to pick and choose what suits them best. Better demand from Asia = positive expectations for the rest of the year = higher prices, or weak leather demand = high inventories = still little prospect for sustainably higher prices. It is obvious that business strategies at the moment are almost exclusively driven by the individual positions and situation of market participants. Often, it gives the impression of acting according to the principle: what should not be, cannot be. If there is any truth in this assessment, then the next weeks and months promise very interesting developments.

The kill

At the moment there is actually little to say about the situation in the beef industry. Business is bad, the holiday season is weighing on demand and there are really no reasons that can change anything about the situation in the next few weeks. Here, too, people are trying to get through the summer and hope for an improvement from September onwards, but nobody really knows where it will come from.

What do we expect

In Europe, hardly anything decisive will happen in the next few weeks. The last negotiations still have to be concluded in Europe and even these will not be very easy. More and more tanners are trying to use the summer phase to influence both price and supply in their interest, knowing that many suppliers do not have much of an alternative, except possibly to produce semi-finished goods themselves. The interest now is in Asia, where it will become clear whether demand is strong enough to push through higher prices in the coming weeks. The price level itself is very low and therefore, if demand is good, it may be up to one or the other US dollar whether to buy or not. If higher prices can be enforced in the coming weeks, then this gives cause for a certain optimism. If customers withdraw completely and totally from higher asking prices, then it can be assumed that until now they have only bought production cover, but do not really expect better leather orders.

Price Table

Type Weight range Avg. green weight Salted weight Avg. weight salted Price per kg Trend
Ox | Heifers 15/24,5 kg 22,0/23,5 kg 13/22 kg 20/21 kg € 1,10 Stable
25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 0,70 Stable
Dairy cows 15/24,5 kg 22,5/23,5 kg 13/22 kg 20/21 kg € 0,55 Stable
25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 0,50 Stable
30/+ kg 33,5/35,5 kg 27/+ kg 29/31 kg € 0,50 Stable
Bulls 25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 0,90 Stable
30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1,05 Stable
40/+ kg 45,0/48,0 kg 34/+ kg 38/40 kg € 1,00 Stable
Thirds 15/+ kg 25,0/27,5 kg 13/+ kg 24/26 kg € 0,40 Stable
Thirds bulls 30/+ kg 38,0/40,0 kg 24/+ kg 33/36 kg € 0,50 Stable