Market Report 07.07.2023

What happened this week

The second half of the year has begun and those who love continuity can rejoice, because it began just as the last one ended. In Europe, people are eagerly awaiting the final prices that will be agreed at the slaughterhouses for the month of July, and internationally, people have pretty precise ideas about the prices they want to pay for cow hides in particular. You can spin it any way you want, but the general discussion about the development of prices continues to be driven by strategies and individual positions and much less by the realities of the market. From our point of view, price adjustment is more than overdue, especially from the heavier and better hide categories. The basic assumption of some that there is a corresponding demand for leather for every hide at the current price is, in our opinion, also not correct. If this is fundamentally correct, then it is more than sensible to reduce the corresponding risks for the moment not by demand-covered raw materials accordingly. The thesis, which is still held by some colleagues, that there will be a significant reduction in the kill in the coming months and so raw material demand will not be covered, cannot be substantiated by the simple facts. This does not mean, of course, that the production of meat will be economically successful. Another negative factor for the coming months is the now falling prices for lime splits and trimmings, which with their soaring prices in the past nine months have contributed not insignificantly to supporting the prices for cattle hides. This week’s sales were again concentrated almost exclusively on the Asian markets. Here the weekly routine of the last few weeks was repeated again. Customers continue to be interested in dairy cows, but they are sticking to their strategy of not going beyond the prices agreed through the WeChat groups in northern China and then passing them on through agent to agent and seeing who and where might be willing or forced to accept the levels. Obviously, though, word has got around that the prices you imagine don’t actually end up being realised anywhere. So, it sometimes takes days to slowly agree on some compromise in small triple steps, which then, however, does not really satisfy both sides. The currency also remains a problem, and the development of the US dollar does not support either side. Overall, we would say that a significant correction in slaughterhouse prices is necessary to justify current selling prices. We still could not detect any interest for better and thus more expensive goods in Asia. At the moment, it is obviously more the number that counts than what you actually get for it. In Europe, it is more a case of spot deals, where perhaps a small hole in production still needs to be filled here or there. The big deals are still a long time coming, We don’t think the tanners have clearly explained already what they need until the holidays, nor are there any price negotiations before the prices at the slaughterhouses are fixed. From our point of view, the volume of the sales will also clearly depend on whether adequate price reductions can be achieved.

The kill

There is very little fluctuation in the kill at the moment. The school holidays are slowly setting in and it now remains to be seen to what extent this will influence the demand for beef. That will certainly also depend on how large the share of holidaymakers who stay in Germany will be. The restaurant business continues to be much better than normal consumption in the supermarkets.

What do we expect

Here we are again, waiting for the wise decisions regarding prices at the slaughterhouses for the coming weeks. It remains relatively pointless to try to overcome such difficult phases with the old routines. If one wants to speculate and actually bet on a rising market after the summer holidays, then one can of course stick to one’s position and take the risk. However, if one wants to be solution-oriented, then it would be advisable to use the great market advantage that European hides possess due to quality and to choose the pricing in such a way that the purchase risk would be manageable for European customers and correspondingly more attractive for international customers than reaching for other origins. The next two weeks will show what the final decision will be.