UK: Hide and skin values remain under pressure
After a notable period of stability, UK heavy cattle hide values have taken a dip in recent weeks. The supply chain continues to be squeezed by increased cost of production (such as cost of energy, chemicals and cattle), and demand for finished leather in sectors such as furniture and automotive remains sluggish. Commentary from market analysts TheSauerReport suggest that European tanners are well stocked ahead of the traditional August shutdown period, with orders now coming through for the September restart.
Reports out of China suggest that tanners there have been keen to secure available supplies of high-quality European cowhides, as demand from continental processors slows into August. Some improvements in Chinese upholstery demand have been seen recently, with shipping rate reductions and strengthening exchange rates also improving returns. However, strengthening exchange rates make Chinese purchases more expensive, which has reportedly impacted sales more recently.
Looking at supplies, cattle slaughter in the EU has been lower through the first quarter, and is expected to see out 2023 in a lower position. Seasonal uplifts in cattle slaughter during the remainder of the year are forecast for Ireland and the UK, but output is expected to be lower than 2022 for the year as a whole. A key watchpoint is how sustained milk price decreases may influence cow slaughter over the next few months. TheSauerReport note that European tanners foresee finished leather demand to remain lacklustre, at least in the short-term, which may continue to weigh on hide prices going forwards.
Price data for ovine skins shows that on the whole, product remains a cost to abattoirs. Market reports from the continent suggest that Turkish buying activity has quietened recently amid political elections. Supplies of new season lambs from the UK and Ireland have been slower to market compared to a year ago, while continental production has seen more mixed performance so far this year. Some industry reports suggest that other fifth quarter products are also under pressure currently, further challenging margins across the supply chain.
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