The virtual collapse of the market value of hides and skins in recent weeks, coupled with the shifting of BSE testing charges from government to processors, is starting to have a significant impact on meat sector margins.
The Scottish Association of Meat Wholesalers (SAMW) warned that hide and skin prices have plummeted by between £15 and £18 per animal in recent weeks, leaving both items at not much more than half their previous value. "With many processors handling up to 1,500 head of cattle a week, this decline is imposing a huge new financial burden on margins which were already extremely tight," said " said Allan Jess, SAMW president
Reduced global demand for leather goods is being blamed for the price fall, particularly the knock-on effect of the recessionary pressures being felt by companies in the car seat business and similar.
"As a meat sector by-product, of course, the number of hides and skins we produce isn't responsive to the market demand for leather," said Jess. "This leaves us exposed to the sort of price collapse we're currently experiencing. At the same time, however, in the tight marketing position we've faced this year, earnings from hides, skins and tallow have all been fully calculated into processing budgets with no failsafe margins being allowed for."
Jess, speaking after the December meeting of SAMW's executive council, also commented on the 'particularly galling fact' that one of the first changes of the New Year will see the cost of BSE testing being shifted from the government's budget to processors.
"The raising of the BSE testing age limit from 30 to 48 months is very much a case of one step forward and two steps back," he said. "While it's obviously a bonus to have all healthy stock available for consumption, DEFRA's unseemly haste to grasp the opportunity to off-load the cost of testing onto processors is deeply disappointing. The cost of testing is around £15 per cattle beast, a charge which, as a public health measure, we believe should continue to be paid by government."
He added: "This can only add further to the margin pressures being felt by SAMW's member companies with the inevitable impact being felt, in due course, throughout the whole meat chain."