Hides and skins supplies to 2010

29 November 2004

George Rapsomanikis presented a paper which looked at the supply of hides and skins and the demand for leather and leather products which had been modelled within a partial equilibrium framework. Projections for the supply of hides and skins are made available by projections on meat production provided by the World Food Model that are converted into production of hides and skins on the basis of country-specific coefficients that reflect hide and skin collection rates. In the medium term to 2010, global production of hides and skins is expected to continue to grow at a slow rate (Tables 1 and 4). Slow or negative growth in production in developed countries is expected to be surpassed by faster growth in developing countries where breeding herds are likely to expand in order to satisfy domestic demand for meat. Among the developed countries, production of bovine hides and sheep and goat skins in North America is expected to decline, whilst in Europe and the former Soviet Union region, the negative trend experienced during the past decade is likely to be reversed. This is mainly due to improvements in income that are projected in eastern European countries and Russia and the subsequent increase in demand for meat and slaughter. Production of bovine hides and sheep and goat skins in developing countries is projected to increase, amounting to 56% and 71% of the corresponding global production levels in 2010. This increasing trend is likely to be governed by growth in slaughter and the per capita consumption of meat, as well as by increased efficiency in the collection, flaying and preservation of hides and skins, as in the case of Africa. Bovine hide production in Latin America, the largest producing region, is likely to grow at a slow rate to around 1.44 million tonnes by 2010 (see Table 1). In the Far East, and especially China, production of bovine hides and sheep and goat skins is expected to grow at 1.83% and 1.8% respectively, rates slower than those of the past decade, as the demand for meat levels off. In Africa, the production of bovine hides is likely to grow at 1.81% per annum, a rate higher than that of sheep and goat skins, due to a strong trend in the consumption of beef. In the Near East, production of sheep and goat skins is expected to grow at a relatively fast rate as countries in this region are likely to rebuild the breeding flocks after the drought of 2000 in order to meet growth in demand for the traditionally consumed mutton. More than 50% of bovine hides and around 40% of sheep and goat skins is processed into footwear, whilst the remainder is used for the production of garments, furniture and travel goods. It is projected that, in the medium-term, leather shoes will continue to be the major leather product consumed, although other products are also expected to increase their share, especially in the developed countries. Whilst the consumption of leather products is mainly determined by the level of prices, income and consumer preferences on other product attributes, the production of hides and skins depends on factors related to the meat market that are exogenous to the hides and skins and leather markets. These differences in economic incentives at both ends of the leather supply chain often cause wide price variation as the market adjusts to equilibrium. In the medium-term, it is likely that income growth will stimulate demand for footwear and other leather products and, as the supply of hides and skins will record restrained growth rates, prices will strengthen to bring consumption in line with production. In the medium-term, consumption of leather products, expressed as raw equivalent, in the developing countries is expected to increase by an average of 1.13% and 1.77% per annum respectively. These rates reflect a slowdown in consumption in the developing countries, as compared with the previous decade which was characterised by a strong upward trend in the Far East and especially China. Here, improvements in income in conjunction with increased tanning capacity and gains in efficiency in the manufacturing of footwear stimulated demand. It is expected that consumption in China will decelerate, as the possibilities for further efficiency gains may be exhausted and the income propensity to consume leathergoods is likely to diminish. Consumption of hides and skins in Africa is expected to increase by 1.54% and 4.67% per annum respectively, mainly due to improvements in income, whilst in the Near East, consumption is likely to increase by slower rates. In Latin America, it is expected that consumption will contract slightly. In the developed countries, consumption is projected to increase at a slower rate (see Tables 2 and 5) as relatively slow or negative growth in North America, Europe, Oceania and Japan is likely to be offset by rapidly growing consumption in countries in the former Soviet Union region that will experience rapid income growth. Among the developing regions, the Far East is expected to remain the most important net importer of bovine hides, with imports projected to grow by 1.24% per annum to around one million tonnes by 2010. It is likely that, given the tanning and footwear manufacturing capacity in China, most of the imports in the Far East will be in the form of raw hides for processing and re-export to other developing countries. Exports of bovine hides from Africa are likely to grow quickly, representing an important source of export earnings for countries such as Kenya, Ethiopia, Somalia and Zimbabwe, whilst growing domestic demand for sheep and goat skins is likely to result in a reduction in the exports of this commodity. Latin America is expected to continue being the most important net exporter of bovine skins and leather products accounting, by 2010, for 10% of global consumption. Developed regions are expected to remain, as a group, the principal net exporters for hides and skins. Exports of bovine hides from North America are likely to grow at a fast rate, whilst those from countries in the former Soviet Union are expected to decline due to strong domestic demand. Oceania will remain the dominant exporter of sheep and goat skins, whilst net imports of both bovine hides and sheep and goat skins into Europe are projected to level off by 2010 to 47,000 tonnes and 59,000 tonnes respectively, exhibiting slow rates of growth.

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