The rumour a few weeks back that some factories were looking at a lamb skin disposal charge came as a shock. The fact that the skin was always treated as part of the overall value of the lamb when trade was good means that it should still be part of the overall value when it is bad. Factories can’t have it both ways.

It is a reality, however, that unlike beef hides, for which trade is good, the trade for lamb skins has collapsed. The problem with lamb skins has been building for the past year. In the first half of 2015, lamb skins were worth €3-€3.50 each. Now they are getting €1 and hide merchants say they are in fact worthless and point to yards full of unsold skins as evidence. What has gone wrong?

Unlike cattle hides, lamb skins are used almost exclusively in fashion. Two mild winters last year and the year before are blamed for killing demand, but fashion choices have been an even bigger issue. Ugg boots had been fashionable a couple of years back but are now less so, which means a major user of lamb skins is no longer as prominent in the market.

Turkish market

A further problem this year has been the fallout of the trade embargo imposed by Russia on Turkey after the shooting down of a Russian plane by the Turks earlier this year.

Traditionally, skins from Turkish sheep are exported to Russia, leaving an opening in Turkey for European skins. This was gone this year and even though Turkey and Russia have recently patched up relations, it is too late for this season. Lamb skins are at their best in the summer months and that is when merchants do most of their business.

The Chinese market is also in the doldrums – the explanation offered is that many small processors are being closed as the government is enforcing stricter environmental controls. The All China Leather Exhibition (ALCE), which starts in Shanghai on 31 August, will give an indication of what way the Chinese market is heading for shins and hides for the rest of this year.

In the UK, Hennan Prosper, the biggest lamb processor in the world, is in virtual control of the UK skin markets having acquired the West Yorkshire Fellmongers and the Marshall Farmer Group.

Hides

Unlike the lamb skins trade, the cattle hide market has remained fairly robust this summer, with steer and heifer hides worth €50-€52 and cow hides now €15 less. It is a long way from the peak of over €70 two years ago but, given the experiences in the skin market, stability is welcome.

Whereas 99% of lamb skins are in the fashion market, hides are associated with upholstery and shoe production. Also, unlike beef, the value of hides increases with their size with the very best and largest hides going to the luxury car market. With Mercedes having its best ever second quarter, that market is buoyant at present.

The shoe business isn’t strong, however, and the general furniture upholstery market in China, which is the main outlet for cow hides, is also weak as the present.

Comment

Cattle hides and lamb skins are an important part of what is known as the fifth quarter. These are the parts of the animal that are removed in the abattoir prior to the carcase being weighed. It is the dressed carcase on which the farmer is paid so the factory gets the products removed prior to this without any cost. Though they don’t cost the factory anything, many of the products removed have value and the lamb skins and cattle hides are the most valuable individual components removed prior to the carcase being weighed. The overall contribution of the fifth quarter is reflected in the price per kilo paid by factories for livestock. This principle should mean that whatever skins or hides are worth it is reflected in the pence per kilo paid for the carcase.