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2 TUESDAY, OCTOBER 8 2013
World Leather BusinessWeek
These sales are based on a formula from
mandatory price reports. The choice cuts are
quoted at $192 and select at $177 leaving
the choice/select spread at $17.
Autumn placements will be benchmarking
against the smallest placement quarter last
year since 1980 [Oct-Nov-Dec]. While some
might regard an increase in feedlot
placements in October to be bearish, when
compared to a five-year average, this
October will track a continuing historically
small placement number.
The first hint of winter and frost is moving
across the plains dropping snow in the
Dakotas and rain in the south. The cash
markets for stocker and feeder cattle have
been leading the futures higher. A drop in
the corn prices also encouraged lower
estimates of feed cost and helped demand
for feeder cattle in trading across the plains.
A 750 pound feeder steer is selling for $162
in the southern plains.
Corn prices firmed from recent lows. Grain
merchants are pricing October deliveries of
corn at $1 over December futures in the
southern plains south of Amarillo. North of
Amarillo into southwestern Kansas quotes are
$.50 over December. New crop corn will
drop the cost of corn from the current $13
cwt. to under $9 cwt. - a whopping 33%
decline.
GERMAN PERSPECTIVE - 08.10.13
W
hat happened this week:
The week
passed with very little activity. There
were holidays in China and a local holiday in
Germany on Thursday, before the reasonably
long period until the Christmas break and the
Chinese New Year break at the end of January.
This is also the period of full production for
most tanneries around the globe as well as a
period of higher demand for hides which
generally lasts until the end of the first quarter
of the following year. Most of the trade -
sellers and buyers - are trying to dig their
heels in, because it is extremely important to
get the beginning of the season right.
In many years the final quarter - due to
higher kills in Europe and a decent inventory
position of tanners in Asia - has shown a
weaker price trend followed by a swing in the
first quarter when tanneries need to cover the
rest of the busy season and the kill gets lower
around the globe. It is when the southern
hemisphere is taking the long summer break,
Europe and the northern hemisphere miss the
kill during the Christmas season and after the
New Year consumers take a break in beef
consumption. Most suppliers around the
globe try to learn from the past and take a
strong position early to prevent the market
from any downward correction into the final
quarter of the year and they will most likely
play it hard again this time. However,
conditions in various markets are different and
it is difficult to generalise.
The partial government shutdown in the US
might have an effect on business, but for the
moment the first result is a falling US dollar:
US hides are becoming more competitive and
others less so. If this trend does not change
quickly it could become a shot in the arm for
those who did not take the effect of
currencies and economics into consideration:
we have seen these factors sometimes have
more influence on the markets than the
supply and demand balance itself. Last week
the impact was limited, but preparing for the
next abattoir negotiations and the meetings
at Lineapelle leather fair, Bologna [Italy,
October 8 to 10], it might give some people
something to think about.
With the new currency levels the valuation
of European export hides is becoming another
hit. The market has become the playground
of the big players with interests on both sides
of the table which is not helping smaller
tanneries. Not being in the prime line of
buyers and not being part of the political
sales, it is getting increasingly difficult for
them to find a base for their raw material
calculation. This is an issue not only in the
hide market but also in other commodities.
We see a market that is dominated by
segments and size. While segments of high-
added-value chains can easily justify their
price, the segments where only size matters
are much more complicated. So far, the
games have worked for both sides, but if the
fundamental balance between supply and
demand is disturbed it will get tricky. For the
moment the essential question concerns
whether leather demand is going to be
affected by prices. It has suited some on both
sides that the recent mixture of pricing and
reporting has stabilised the market and
prevented a number of players from inventory
losses.
Sales this week were difficult. There was
some Chinese interest for dairy cows, but it
took days to bring low bids to levels that
could be considered to be finally killed by the
falling USD. Consequently there was a
sufficient amount of interest for cows, but an
insufficient amount of profitable business.
Heavy bulls are still running their course, but
the higher kill is beginning to ease the supply