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COMMITTEE ON COMMODITY PROBLEMS |
INTERGOVERNMENTAL GROUP ON MEAT |
SUB-GROUP ON HIDES AND SKINS |
Sixth Session |
Cape Town, Republic of South Africa,
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PROJECTIONS TO THE YEAR 2005 |
1. The world's hides and skins, leather and leather products industry has changed significantly over the past 15 to 20 years. During this time there has been a considerable shift in the location of the tanning and leather manufacturing industries to developing countries where manufacturing costs are lower. Many developing countries, being aware of the economic potential of their raw hides and skins, have made considerable efforts to develop these industries
2. Hides and skins are primarily produced as by-products of the meat industry. Consequently, their output is generally inelastic to changes in demand for hides and skins. Imbalances between supply and demand of hides and skins have often resulted in considerable price fluctuations. This commodity group is also characterised by its extreme heterogeneity. There is increasing interest in exotic skins from game animals, reptiles, fish, etc., in addition to the traditional source of hides and skins from farm animals. These projections, however, cover only hides and skins obtained from the following farm animals: cattle, calves, sheep and lamb, and goats and kid. Demand for hides and skins has been modelled as dependent on consumer incomes, population, and on past trends in consumption. It has been assumed that all hides produced will be utilised in the tanning industry and that demand for leather has no direct impact on production of hides and skins. The supply of hides and skins derives from the projected production of meat to the year 2005 as output from the World Food Model.
3. Global production of bovine hides and skins showed a slight upward trend over the past decade, at an average annual rate of 0.7 percent per year. World production is projected to increase at 0.8 percent annually to reach a record level of about 5.8 million tonnes in the year 2005. Analysis of changes in production suggests that the relatively rapid growth in the developing regions would be partially offset by declining production in the developed countries.
4. Output of bovine hides and skins in developed regions would decline by about 0.4 percent annually to the year 2005, to just above 2.7 million tonnes, reflecting a reduction in the number of cattle slaughtered as a result of contraction in herds and the continued shift of consumer preference from red meat to poultry meat. Among developed countries, output in the European Community is expected to fall more rapidly than in the 1990s in line with reduced demand for beef. Production of bovine hides in North America is also projected to decline to the year 2005 as a result of reduced slaughtering in the United States. In countries of the former USSR and in some of the Eastern European countries, structural changes and, in some cases, the loss of foreign markets, resulted in a contraction in demand for livestock products in the second half of the 1990s. As a result, cattle herds are expected to contract, and slaughterings would recede from the levels reached in the mid-1990s. Consequently hide output is projected to decline by about one percent per year. By contrast, in Oceania, bovine slaughterings are expected to recover from the stagnation of the early 1990s mainly due to a reversal of the previous negative trend in bovine meat output. Consequently, output is projected to increase by about 1.3 percent annually.
5. Developing countries' output of bovine hides and skins is forecast to expand by 2.1 percent per year to over 3 million tonnes in the year 2005, as a result of strengthening demand for meat. The share of developing countries' hide production in the world total is expected to reach almost 53 percent by the year 2005. The largest increase is expected to take place in Asia, although the financial crisis of this region is likely to slow growth in some countries. Per caput beef consumption in Asia is increasing rapidly in many countries, in particular in China and the Republic of Korea. In addition in the Republic of Korea, beef is the preferred substitute for increasingly scarce seafood. Asia, therefore, would continue to be a major source of hides with its share of global production rising from 19 percent in 1994 to 26 percent in 2005.
6. In Africa, beef consumption is also increasing rapidly and this, coupled with more efficient collection of hides and programmes to improve flaying and curing techniques, is expected to sustain a growth of about 2 percent per year in hides output which has been projected to reach 364 000 tonnes by 2005. Growth in the output of bovine hides and skins is expected to continue in Latin America and the Caribbean, although at a much slower rate as consumers are anticipated to diversify their meat consumption pattern and shift to other meat.
7. World production of sheepskins and goatskins is projected to rise at 1.9 percent annually, to reach more than 700 000 tonnes by the year 2005.
8. The developing countries would continue to account for more than two-thirds of the world's sheep and goat flocks, and their share in world production of these skins has been projected to expand to almost 69 percent by the year 2005. This reflects increased productivity, the result of continuing programmes to raise the standard of animal husbandry and to improve utilisation of livestock products, especially in those countries where they are required for the production of light leather and leather garments. The Far East region is expected to continue to be the main supplier of raw sheep and goat skins.
9. The slaughtering of sheep and goats in the developed countries has been projected to decline, as a result of a contraction in flocks. Consequently, aggregate supply of sheep and goat skins is also projected to decline marginally. The rate of decline in Oceania, the leading exporting area among the developed countries, is expected to decrease, although the sheep sector is likely to continue to be affected by depressed prospects for wool. By contrast, in countries of the former USSR, output of sheep and goat skins is projected to recover, sustained by increased demand for sheep meat.
10. Estimates of consumption of leather and leather products used in this analysis are derived from production and trade data.1 They are expressed in raw hides and skins equivalent.
11. World demand for leather and leather products (in raw equivalent) is projected to continue to expand to 2005 under the influence of growing incomes and, to a lesser extent, of the increased access for industrial products, including leather and leather footwear, agreed to as part of the Uruguay Round. Growth in demand is expected to be at a higher rate than in the 1990s and it is projected to exceed the growth of production, pointing to some further firming of prices. However, the projected rate of growth of demand varies between regions, reflecting the changing lifestyles and different impact of factors such as income and population growth and consumer preference for genuine leather products. Globally, footwear is likely to remain by far the major end-use for hides and skins, and consequently demand prospects for leather shoes would continue to determine, to a large extent, aggregate demand for hides and skins, despite the increasing share of leather absorbed by other end-uses, such as clothing and upholstery.
12. In the developing countries, demand for leather and leather goods is projected to rise although it will be dampened, at least in the short run, by the effects of the Asian financial crisis. At 1.1 percent, demand growth would be higher than in the developed countries where it is estimated at 0.6 percent annually. Nevertheless, developed regions would still account for 54 percent of the estimated global leather consumption in the year 2005. Consumers in the more affluent societies are expected to continue to place emphasis on high quality products. As a result, demand for leather and leather products is expected to increase in the developed countries, particularly in North America and in those European countries with long-established tanning and leather industries.
13. The tanning and leather products industries of the developing countries have undergone considerable change in the last two decades. The quantity of raw hides and skins exported from these countries has been reduced, and increasing quantities of finished leather are converted into leather garments, footwear and other leather manufactures for domestic markets and export. Tanning and manufacturing capacity of the developing countries is expected to continue to grow to the year 2005 in Asia, most notably in China, India, Pakistan, and in Latin America. However, exporting countries in Asia are considered unlikely to replicate the fast growth rates achieved in the 1990s, due to the negative effects of the Asian financial crisis which is likely to curtail growth of processing and manufacturing capacity in a number of Asian consuming countries for some years.
14. The effect of higher production costs, due in part to more restrictive environmental laws and regulations, is likely to further reduce leather processing in the developed countries. In Eastern Europe however, where production costs are lower than in Western Europe, the tanning and leather manufacturing industry, especially in the shoe sector, is likely to expand.
15. The pattern of net trade in bovine hides and skins, leather and leather products (in raw equivalent) has changed markedly during the last two decades. In the early 1980s developing countries as a whole were net importers from developed countries. By the 1990s they had become net exporters, and their net exports are expected to continue to expand further in the coming decade. In particular, exports from Latin America and Africa are projected to expand over the period to 2005. Asia as a whole is a net importer, with a number of countries in the region importing raw materials also for processing and re-export. However as domestic production in this region is projected to continue to expand more rapidly than consumption, net import requirements are likely to contract over the period to 2005.
16. Among developed regions North America will remain a major net exporter, and its exports are expected to increase marginally. Import requirements by European countries are projected to continue to expand, as consumption continues to increase and production contracts.
17. Developing countries are, as a group, net exporters of sheep and goat skins. Their net exports are expected to expand by one percent per year in the period to 2005 as growth in the processing of skins is proceeding more rapidly in developing than in developed countries.
18. Among the developing regions, Africa is projected to be the only significant net exporter by 2005. By contrast Latin America and Asia would be increasingly net importers because consumption in these two regions is projected to expand more rapidly than production. Among the developed regions, Europe is projected to remain the largest importer of sheep and goat skins and derived products, with Oceania remaining the dominant exporter. However the volumes involved in both cases would continue to show a slight downward trend.
19. Hides and skins and their derived products are a major source of export earnings for developing countries, having risen from US$2 000 million to about US$ 16 000 million between 1980 and 1995. The global value of trade in hides and skins, leather and leather products exceeds that of meat and amounts to almost US$40 000 million. For some countries, exports of hides and skins are particularly important. In Ethiopia, for example, this group of commodities is the second largest export earner. In the past two decades as hides and skins produced by developing countries have increasingly been processed to higher levels prior to export, the developing countries' share in the global value of exports has risen from 20 percent to over 40 percent.
20. Nevertheless, there remains scope for many developing countries, particularly in Africa, to gain increased benefits from these commodities. Despite past efforts to improve hides and skins quality and reduce waste, considerable losses are still incurred from non-collection of this valuable material as well as from damage to hides and skins as a result of poor livestock management, diseases, and inadequate treatment during and after slaughter. Efforts to introduce appropriate grading and pricing of raw materials are required to stimulate higher levels of collection and greater attention to quality in African and other developing countries.
21. Another factor which prevents trade of hides and skins and derived products from reaching its full potential is the existence in some countries of barriers to trade, including import tariffs, export taxes, quotas and bans on exports. The Uruguay Round reduced customs duties for leather and leather manufacturers in many consuming countries. This would be reflected in improved market opportunities for these commodities and should stimulate processing, manufacturing and trade. Despite this, import duties on leather products in many countries remain high when compared with other goods, and negotiations aimed at further reductions might be expected in the forthcoming round of trade negotiations.
1 Data on the consumption of leather and leather products are not readily available, and those on apparent consumption have been estimated from production adjusted by exports and imports. However, global figures for trade in leather products other than footwear are not available. Therefore, the estimates of consumption are based on trade in raw hides and skins, leather and leather footwear, but not other leather products. These estimates would be distorted for those countries which export or import significant quantities of leather products other than footwear. In light of these difficulties, estimates of consumption have been adjusted to reflect the assumption that, at global level, consumption equals production.