What happened this week: This week was basically predominated by the variations in the currency markets and rising hide prices in US$ terms. The Chinese, who have been the driving force behind the recent strong market activity, realised that prices in the US have risen 5-10% in recent weeks, largely because of the weak US$. Although this is comfortable in one way, because all purchases that have taken place since the beginning of April look pretty cheap now, prices are not looking very attractive anymore so many buyers have taken more of a wait-and-see position after seeing the latest offer lists.

Interest was still available, but mostly at prices that were valid about two weeks ago. At the present asking levels, most of the interest disappeared quickly, so trading activity throughout the week was reasonably low. This is not a big deal as, providing all the letters of credit arrive in time, enough material can be shipped from the contracts booked over the past two months. So, the week’s limited activity was focused on some heavy cows, and some heavy bulls also found homes.

While prices for males were still reasonable despite the weak US$, negotiations on cows were pretty tough and the increases needed because of the currency situation were not achieved. Only on Friday afternoon did the recovery of the greenback offer an opportunity to hedge the weekly export revenues at acceptable levels.

As more time passes after the big buying bonanza seen since mid-April, more people are discussing how much this was actually justified by the leather business around the globe. One has a positive story and the next has a negative one, but nobody has real facts and proof as to why the leather business should really pick up to the same extent as raw material activity in the second half of the year.

Asking some of the Chinese buyers whether they have the leather orders in hand, the most frequent reply is that they think the business will pick up in July and August. So, the logical consequence is that most of the raw material activity is based on hopes rather than on facts. As much as we are all looking forward to a turnaround in the global economy, it is difficult to find hard facts that justify the optimism. It seems the investors believe that what has come down must eventually go up again. 

In Europe the market remained quiet on the selling side with most tanneries already planning for their holidays. Purchasing is limited to covering immediate needs and has become even more short term than ever before. At the abattoir door, one can sense pretty little of the same and it seems some traders could still spend quite a bit of money before their pockets are empty. Otherwise, it is impossible to explain what has been happening since April, which seems to be repeated again every month. This mainly applies for the heavy males where normally the automotive tanners are the driving force, but it is difficult to believe that it is them that are supporting the situation.

The kill: The kill has stabilised a bit and the weekly holiday season is behind us. So we should now settle with the weekly number on the present reduced summer levels. Weights have come down as well and this general situation should be valid now for the next six to eight weeks.

What we expect: We still don’t expect much. Sellers and buyers are still holding their positions and are pretty distant. Neither side needs to act for the time being, so the currency market might be the most active mover until either needs to make decisions again. The fundamentals are not convincing us that prices could move a great deal in the near future. The next big market move could still be quite a way away.

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