Prices paid to processors for leather have slumped by £15 per head of cattle, according to Gerry Maguire, MD of Northern Irish meat processor Linden Foods. The price drop, of 60% on 2008 prices, meant the Linden Food Group had lost out on £2m of revenue across the group's cattle processing operations, he said. Leather revenue for 2009 was expected to be between £2m and £2.3m, down from £4m in 2008.
"Last year and this prices are at the lowest level that they've ever been," said Maguire. "The price of hides is on the floor." Maguire blamed the price drop on the fall in sales of goods that utilise leather in their manufacture, such as sofas and cars.
Although China and Turkey were still buying leather for manufacture, processors' ability to export was being impeded by the lack of export credit insurance available, he added. However the "hole in the business" that the trade in hides had created was being partially offset by a strong trade in offal, another by-product of slaughter.
Cattle hides represent approximately 5% to 10% of the market value of an animal, with the Linden Food Group slaughtering approximately 160,000 cows a year.
Maguire's comments were echoed by Anglo Beef Processors, which said it had also been hit by the poor cattle hide trade. "This is a very disappointing scenario for the processing industry, and it has affected the margins of every carcase," said a spokesman.
There were no signs of any improvement in the situation, the company claimed.
Approximately half of UK-produced hides go into the furniture and car manufacturing sectors, according to the UK Leather Federation. "There's been a drop of about 40% or so in car sales and that's been reflected in demand for leather in that part of the market," said director Paul Pearson.