Market report | 14.01.2022

With the end of the second week of the New Year, the daily business routine slowly begins to determine events again. The major impact continues to come from the events and consequences arising directly or indirectly from the pandemic. Europe is seeing rapidly increasing numbers of infections everywhere and the resulting quarantine measures are inevitably having a greater or lesser impact in all areas. Some relief is coming from the milder courses of the current variant and the resulting shorter quarantine periods for those affected. Nevertheless, logistics and production remain hampered and the extent varies from sector to sector. Of course, particular attention is now being paid to developments in China. Omicron has now reached China and the big question ahead of the Chinese New Year and the Olympic Games is: Can the same measures that have already protected China from the spread of the Delta variant now also be used to control the much more contagious Omicron variant? Every opinion on this remains speculation, but we will only know for sure in 6-8 weeks, both in Europe and in China, how strong and to what extent the new wave will affect the people and thus possibly also the economy. In our market, we also began this week with a cautious approach to the current market situation. At the beginning of the week, the old reflexes worked. The slaughter industry signalled at the beginning of the week – as usual – the expectation of higher prices in reaction to lower production.

However, as there was no real need for a serious discussion on new deals until the end of the week, this was initially accepted as the expected strategy. As the week progressed, however, buyers’ impressions of the market situation on the international markets and caution with regard to the further impact of the pandemic became more and more prevalent. The positions that now emerge for the real upcoming negotiations in the next two weeks are thus clear and are probably rather wider than closer apart. In any case, market activity and sales this week have been very quiet. In China, too, there is now probably more of a wait-and-see position ahead of the Olympics and Chinese New Year. Business is never zero, but overall interest is much lower than during the holidays. However, due to the very low slaughterings and the simultaneous low buying interest, the turnovers and sales are so small that one cannot speak of a representative price development during these weeks. What can and must be done continues to take place within very narrow limits around the prices we have been seeing since the beginning of December. If we are honest, we have to assume that there will be an almost four-week production pause in China from next week to mid Feburay, and at the same time there are still considerable shipments to be made. At the same time, with the end of March, the production of furniture leather is slowly decreasing and so far no compensation from the other sectors is really visible.

The kill

The kill is recovering slowly but steadily. The extremely low values of the first week are behind us and it seems that our expectation that we will be about 20% below the December production figures will roughly reflect the reality of the next few weeks.

What do we expect

We don’t expect much change next week either. Initially, there will probably be a tough struggle over pricing at the slaughterhouses and only then can we expect the price level on the market to really emerge for the next few weeks. In our view, there are still good reasons not to develop too much hope for the near future and a sensible handling of things seems highly advisable.