Market report 25.03.2022
Osterhorn, Friday, 25.03.2022
The US $ in EURO 1,1010
What happened this week
In addition to the humanitarian catastrophe, after four weeks of war the certainty that there is unlikely to be a quick end, people everywhere are now busy assessing and evaluating the means and long-term consequences of the war. Of course, the influences are completely different in the various sectors of the economy and in the various regions of the world. Nevertheless, hardly anyone will seriously doubt that the influences on our sector, too, can be anything but negative. Even though the Corona crisis as a whole has been very much out of the spotlight in Europe, this week we had to deal with it and its effects again. In addition to the loss of labour due to the high number of infections in Europe, the situation in China is coming more and more into focus again. Even though the number of infections is very low compared to all other countries in the world, the government’s decision to contain the disease remains very extreme and is leading to more restrictions in economic activity every day. Again, the impact is very regional, but indisputably, the leather industry is also being severely affected by this as we speak. In addition to the complaint that banks and logistics service providers cannot operate fully at the moment, the increasingly difficult transport is also playing a major role, in addition to the closures of leather factories in various provinces. From our perspective, it is still difficult to decide today how much and how extensive the impact actually is, or whether it is a readily accepted excuse for some for delays in payment and shipment. In any case, it can be felt that a large number of the leather factories do not have so many orders that interruption or reduction of production is a major problem. As in Europe, it never applies to everyone, of course, but it is noticeable and is slowly beginning to have an effect on the market. In the end, it is very similar to the situation in Europe. As far as the market is concerned, we compare the situation a bit to the phase between low tide and high tide, when the movement comes to a standstill and the tides are
fighting with each other. On the one hand, the slaughter industry is still trying to play the low production card and derive the justification for higher prices from it. On the other hand, the end of the winter season is making itself felt in the leather industry, significant cost increases have to be absorbed and last but not least, uncertainties about consumer demand are increasing in the coming quarters. Rising inflation and especially the extremely increased costs for basic goods reduce the disposable income for other purchases for many people. Raw material suppliers are playing down this risk, while manufacturers fear that they will not be able to pass on the increased costs to their customers to the same extent. For a large part of leather production, it is still true that leather is not absolutely necessary and is by no means a strategic material. However, it is also true that for the next seasons it will first of all have to be checked how expensive the alternative materials will be and what market potential, if any, will result for leather again. Demand from Asia was almost nil this week and communication was often only about free detention time in the port and to delay pending shipments. We did not actually register any new business. In Europe, there were still a few renewals of regular programmes on the agenda, most of which were concluded at unchanged prices after tough wrangling. However, we should not conceal the fact that customers are giving clear indications that they expect significant discounts for the following months. The low slaughter rates are currently preventing a larger accumulation of unsold goods, which traditionally means that greater price pressure has not yet built up.
The situation of the past week has not changed. Strongly fluctuating kills, further increasing livestock prices and farmers who are betting on further increasing prices lead to a very difficult environment for the meat industry. When the prices for meat have fully reached the supermarkets, we will see whether consumers are willing to continue buying the same quantities at the increased prices.
What do we expect
We remain on the side of the sceptics. For the moment, purchases to cover current leather orders are still sufficient to avoid larger unsold stocks. Traditionally, however, this usually changes in the second quarter and regardless of all the other pressures, we do not see that this year would be any different.
|Type||Weight range||Avg. green weight||Salted weight||Avg. weight salted||Price per kg
|Ox | Heifers||15/24,5 kg||22,0/23,5 kg||13/22 kg||20/21 kg||€ 1,25||Stable|
|25/29,5 kg||27,5/28,5 kg||22/27 kg||25/26 kg||€ 1,00||Stable|
|Dairy cows||15/24,5 kg||22,5/23,5 kg||13/22 kg||20/21 kg||€ 0,90||Toppy|
|25/29,5 kg||27,5/28,5 kg||22/27 kg||25/26 kg||€ 0,88||Toppy|
|30/+ kg||33,5/35,5 kg||27/+ kg||29/31 kg||€ 0,80||Toppy|
|Bulls||25/29,5 kg||27,5/28,5 kg||22/27 kg||25/26 kg||€ 1,20||Stable|
|30/39,5 kg||36,0/37,0 kg||24/34 kg||31/33 kg||€ 1,55||Stable|
|40/+ kg||45,0/48,0 kg||34/+ kg||38/40 kg||€ 1,50||Stable|
|Thirds||15/+ kg||25,0/27,5 kg||13/+ kg||24/26 kg||€ 0,60||Stable|
|Thirds bulls||30/+ kg||38,0/40,0 kg||24/+ kg||33/36 kg||€ 0,60||Stable|