Abattoirs making a loss on skins and hides
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Sheepskins are now being classed as a cost to the meat processing sector, despite previously being a valuable by-product for abattoirs.
Global demand for sheepskins and hides fell at the start of the pandemic and has struggled to recover above pre-pandemic levels ever since.
Demand from major markets has been limited, with higher processing costs and exchange rates both playing a part, according to the industry.
See also: Finished prices drop back as more spring lambs come to market
Rizvan Khalid, managing director at Shropshire-based Euro Quality Lambs, told Farmers Weekly that abattoirs were having to pay for sheepskins to be removed.
“In the past, we used to get some money for skins, but now they are taken away for a small charge,” he said.
Mr Khalid said the income from the sheepskins would previously cover some of the slaughtering costs for the processors, whereas now it was treated as a waste product.
Exports of hides and skins as raw materials were worth £82m in 2022, down by 6% in value and 10% in volume on the previous year, according to the UK Leather & Leather Goods Industry in 2022 report.
The report found that Italy and China accounted for more than 78% of exports of cattle hides in 2022, while for sheep skins, China and Turkey accounted for almost 84% of the total export value.
AHDB senior analyst Hannah Clarke said: “Some industry reports suggest that other fifth-quarter products [non-meat by-products including hoofs, horns, bones and fat] are also under pressure currently, further challenging margins across the supply chain.”
Hides
Increased energy and production costs have raised the overall cost of processing leather. Combined with unfavourable exchange rates for exports to China, this has been limiting demand for hides.
“After a notable period of stability, UK heavy cattle hide values have taken a dip in recent weeks,” said Ms Clarke.
However, there are some signs of optimism for the market, with China reportedly looking to secure more product and tighter supply in Europe.