Market Report 24.11.2023

What happened this week

Another week in which the general market activity does not leave much to report. On the sales side and the interest in bovine hides, it has changed little or perhaps better said nothing at all this week. China continues to be the only market with some interest in raw material. Interest remains almost exclusively focussed on cow hides. The negotiating range between sellers and buyers is narrowing. Buyers are realising that significantly lower bids vs. the last selling prices will be rejected and sellers should have realised by now that there are certainly no higher prices to be discussed in China at the moment. This means that negotiations are much quicker and you no longer have to spend days discussing prices and sending endless emails. Anyone who wants to buy in China now offers a maximum of USD 1.00 below the last prices and sees whether we as sellers have a weak moment that would lead us to accept this. In the end, a certain amount of cowhides was sold this week and prices ranged between unchanged and minus USD 0.50, depending on the weight category. The fact that China is focussing almost exclusively on the medium weight categories at the moment remains interesting and not entirely understandable. The smaller quantities, which are lighter or significantly heavier goods, are not being bought or only at disproportionately high discounts, which are hardly understandable or justifiable. So far, we have not been able to find a really understandable explanation for this. The problems with European male hides are steadily increasing. The leather industry is currently not fully absorbing the quantities that are being slaughtered and the prices of the goods are simply too high to be able to sell them successfully on the overseas market. Basically, this is a constellation that we have been noticing for a long time, but which is obviously not recognised by the major producers and suppliers. More and more suppliers are deciding to have their products made into semi-finished products, which can only be due to a lack of sufficient salt and storage capacity for the goods. If you look at the development of the business for semi-finished products in recent months, then you have to at least conceptualise that this is either a very courageous decision with extremely positive expectations for the future, or a pure act of necessity because there are simply no other alternatives. As is so often the case, opinions on this differ widely and the next few months will show who is closer to reality and the truth. In any case, we couldn’t find any real interest in male merchandise in any market this week and apart from the usual small coincidental deals and market niches, there are no major negotiations for new contracts at the moment. There will probably have to be another discussion on prices for deliveries into January before the Christmas break, but it may take some time before these talks are finalised.

The kill

Kills are increasing slowly but steadily. Volumes have not yet reached the levels that would have been expected for this time of year. On the one hand, this may be due to the still very difficult meat business, but on the other hand, farmers still seem to be hoping for better prices for their livestock in anticipation of the Christmas trade. From this weekend onwards, the weather is likely to be significantly wetter and colder, which should lead to an increase in the supply of grazing cattle and higher kills.

What do we expect

There is still little reason to believe that the fundamentals of the market will change significantly. The market for females is relatively well protected by the sales of recent weeks and months, whereas the market for males is ultimately only supported by the artificial shortage of supply. If the male product had to find its market internationally, it would have to be orientated towards international prices and the possibilities of its processing. This would undoubtedly lead to a significant price correction. However, this will ultimately be decided by the supply made available to the market by the seller who actually wants to sell his goods. Only then do you have to face up to the realities. Otherwise, the only option would be to wait for a significant improvement in the demand for leather and/or a rapid shortage of supply and that as quickly as possible.