The raw deal
Adil Sakhawat looks into the details of the cow hide trade after Eid-ul-Azha
While observers were celebrating Eid-ul-Azha by sacrificing cattle, tension was mounting at rawhide markets nationwide due to the fixing of prices by the Bangladesh Finished Leather, Leather goods and Footwear Exporters’ Association (BFLLFEA), Bangladesh Tanners Association (BTA) and Bangladesh Hide and Skin Merchants Association (BHSMA).
According to the BTA, around 50% of the annual supply of cattle skin comes from animals slaughtered during the Eid-ul-Azha. Now experts are worried that if such stress in the leather industry continues, it could affect the country’s third-highest foreign currency earner (after Ready Made Garments (RMG) and frozen food).
On a visit to Amin Bazar, one of the largest rawhide markets in Dhaka City, the Tanners Field level officers said they are facing a big problem to collect rawhides at the fixed price during this year’s Eid festival.
“The seasonal businessman and the wholesalers are buying the rawhide without maintaining the announced rate. We are also trying to collect rawhides from the retailers but they think that as this is the election season, so many cattle are slaughtered and price must be higher,” said Nuruzzaman Ripon, the Senior Purchase Officer of Appex Tannery.
Price fix comes unstuck
Prices were fixed on October 12 at Tk85-90 per square foot of cattle skin in Dhaka and Tk75-80 elsewhere, Tk50-55 per square foot of goatskin and Tk40-45 per square foot of buffalo skin. After Eid-ul-Azha, however, it became obvious that these fixed rates were not being maintained by retailers, wholesalers and even by the tannery owners themselves. In the three days after Eid day, for example, wholesalers of rawhide in Amin Bazar, Posta, and Hazaribagh in the capital were buying rawhide from seasonal businessmen, madrasas, and middleman for Tk110-120 per square foot.
Nur Islam, a rawhide wholesaler of Amin Bazar, said he had bought rawhide at a higher rate than the declared rate of the tanners association.
“The middlemen – the retailers – do not want to sell the collected rawhide from different areas of the capital and even from outside of the capital according to declared rate,” he said.
Amin Hamza, a seasonal rawhide businessman, travelled to Posta in Old Dhaka to sell the rawhide he had collected from Banani. He sat with 25 pieces from 2pm to 4pm on Eid day.
“I have bought these for an average of Tk2,200,” he said, “If I cannot sell them for in excess of Tk2,700 each then I have to face a loss. Here the wholesalers offer me Tk2,400-2,500. When I went to collect these rawhide, people told me that this year the price was higher than last year.”
Fortunately for Amin, by 5pm he had sold his hides for Tk2,750 per piece on average.
Tipu Sultan, general secretary of BHSMA, told Weekend Tribune, “If tannery owners will not collect the salted hide from us according to the market price then we will face huge loss. We have to collect the rawhide by Tk110- 120 per square foot and after preserving it with salt, the actual price will be nearer Tk150. Maybe the Tanners Association will sit with us over the next two days about this matter and we expect they will take decision keeping the market situation in mind.”
Exports still buoyant
Experts do not think this will impact the international market of leather exports, but the domestic leather industry will be adversely affected as the market price is too high.
Tipu Sultan, former president and present adviser of BFLLFEA, said, “This year will be a bad year for us as the market price of rawhide is so much higher. Maybe we the tannery associations are responsible for this hazardous situation, or maybe it is the wholesalers who buy the rawhide without maintaining declared rates.
“We were aware that the price of rawhide will jump this year as this is election year, but this will not affect the export situation as this year the supply of rawhide is higher.”
When asked about the unsustainable market price in spite of a fixed rate, the BFLLFEA president decried a lack of perfect monitoring from the association: “In this case either tannery owners or the wholesalers will face the loss. The wholesalers have to make a profit without their buying cost. So this will affect our market badly.”
The leather industry in Bangladesh has grown exponentially since 1970, and leather is now exported to over 50 countries worldwide. Over 50 local companies are involved with manufacturing various leather goods such as footwear, suitcases, briefcases and attaches, and fashion accessories like belts, wallets, hand bags and case holders. According to the Export Promotion Bureau (EPB), Bangladesh earned around Tk43.6bn by exporting leathers and leather goods in the 2012-2013 fiscal year, up from Tk33.4bn in 2011-2012 fiscal.
The seasonal opportunists
The tannery owners estimate that over six million cows and up to four million goats were slaughtered during Eid-ul-Azha this year. In general, most Eid observers have no intention of making a profit by selling the skin of their sacrificed animals. Some will donate their proceeds to a madrasa, an orphanage institution or to poor people, rather than keep it in their own pocket. Nevertheless, cattle skin is a lucrative business for some.
“Those culprits could not be barred from the market as some syndicates are becoming active across the country only on this occasion, aiming to grab a large amount of money by creating a hazardous situation in the market,” says a tannery owner, requesting anonymity.
Four state-owned commercial banks – Bangladesh Janata Bank, Rupali Bank, Sonali Bank and Agrani Bank – are providing loans worth Tk472 crore for the purchase of cattle hides this year, up from Tk3.55bn in 2012. The privately-owned City Bank are also providing loans to small leather traders during the Eid season, to the consternation of the tannery owner.
“They do not know the local or international markets and they do not even have any interest to rise up this leather business to a better situation,” he says, “They have only the intention to grab money from the root level.”