Market Report 14.07.2023

What happened this week

You can already feel the beginning of the holiday season. Some federal states in Germany already have school holidays and week after week the others will follow. Those who are not yet on holiday are preparing for it, production is coming to an end and where necessary and planned, preparations are being made for maintenance, repair or even installation of new machinery. For the hide suppliers, this is the time to think carefully about what can and must be done with the hides and skins that come in every day. Sometimes solutions are found in contract tanneries, sometimes temporary solutions can be found, but for the most part the last weeks of July and the first weeks of August always remain a phase in which more goods have to be salted, which in turn leads to workers having to be available who actually should also take their well-deserved holidays. In years with good leather demand, more solutions are created, and in years with lower demand, correspondingly fewer, which leads to the logical difficulties and consequences in the handling of the hide flow. Nevertheless, somehow it must and will be solved. For the female goods, demand and possible shipments to Asia always play a big role at this time. This year, too, many are trying to channel as much as possible in this direction, but the demand in Asia as a whole does not make it easy. Selling would be possible, but prices remain the problem. The simultaneous currency development with a weak RMB and a firm euro makes the unpleasant situation complete. According to the inflation data from the US alone, the greenback is up almost 3% against the euro, which is completely insurmountable in sales negotiations. Eat or die continues to be the motto. So, if you eat, you still have to respond to the Asian customers’ USD ideas this week, and at the same time that meant a corresponding loss of revenue in euros. Fortunately, at least a few small price declines could be implemented at the slaughterhouses for the month of July, but this was not really compensated for by falling hide weights and the currency problem. In Europe, suppliers are already trying, with very limited success, to get contracts for the month of September, i.e. for the period after the return from the holidays, into the books. To say the least, customers are not in a big hurry at the moment. So, the week actually went like many before. At the beginning of the week, the Asian clients show up and you can sell what you think is right at prices that are rarely much better than the first bids. There is not much room for negotiation and where the bids are too ambitious, counter offers are not necessary. As time goes by, demand slackened sharply in the second half of the week, and this week the currency problem was added to the mix. Meanwhile, discussions about the future and structure of the slaughter industry are increasing. No one knows what, but everyone knows that significant changes are coming in the next few years. This will also affect the entire supply chain for cattle hides in central Europe, but hardly anyone wants to deal with it today, probably because the nature and extent of the changes are still absolutely unclear.

The kill

In the case of the kill, the situation can also be summarised relatively easily. People complain that there are too few cattle on offer, which is not unusual for the time of year, that demand in the supermarkets is unsatisfactory and that prices are insufficient to achieve satisfactory results. It is hard to imagine that anything will change in this constellation in the next few weeks. However, it does increase the pressure for change.

What do we expect

The wait was over and the decisions on prices were only partially wise…. It seems, however, that while much larger adjustments would have been necessary for goods that have to compete globally, no one wants substantial discounts for the European-oriented types at the moment. In our opinion, however, the interdependencies with the other hide types are not sufficiently taken into account. At some point, however, we will have to face the situation, at the latest when the final realities for supply and demand become apparent in the last quarter of 2023.