What happened this week: The market is still searching for a clear direction. Tanners are still trying to squeeze raw material prices down and sellers are reasonably well sold forward and see no reason why they should accept any counters.

This is rather difficult because of the rapid decline of the US$, which is also eroding euro revenues. However, some sellers have already taken forward positions so that the market is on safe ground. Hides are not presently piling up and larger unsold positions cannot be seen in producers’ hands. Some traders possibly still have positions, but with the market development of the last three months they can't be too happy if they still hold long positions.

The kill is still below normal seasonal levels, so pressure from the supply side is not yet mounting. As a consequence, we have seen very little price movement for a few weeks since our market reversed and settled into the international price trends and ranges. So we are fixed into a pretty narrow price range and in the best of all worlds this level should be maintained at least until the end of the year. After the massive volatility in the market for almost a year now it might be the best thing for everyone. Abattoir prices still need an adjustment to the current exchange rate and market level and this could finally be achieved in November if the players take a more rational view on matters.

Market activity this week was mainly limited to regular buyers. The busy tanners and professionally managed businesses are not gambling on further price declines and after trying to push for lower bids, deciding to buy at steady levels rather than waiting for better. More speculative buyers were holding back and waiting for more bargains to come. However, it seems that there is presently not much market imbalance and not much to expect.

The better the hide quality, the better the demand still is, and since German hides are in the upper end of the quality range, they are finding enough interest at the present price levels. Much higher tanners don't want or need to pay at the moment and much lower sellers don’t need to sell as their positions will allow them to wait for the next buyer who needs to replenish inventory. In the end it seems that only larger currency fluctuations could have an influence on the prices in our region at the moment, and we consider a major change in leather demand pretty unlikely until the end of the year.

Buyers were predominantly originating from the Far East this week. European programme buyers are preparing for their next round in the next two weeks. This applies more for buyers of bull hides as it seems that most Italian dairy cow buyers already did their homework during or right after Lineapelle in Bologna. Most trades have already covered the period until the end of 2009. Bits and pieces of extra-light material were also sold as a direct result of leather orders placed around the time of the exhibition in Italy.

So it was a reasonable, but not spectacular, sales week. This is ok and might be for the best at present. Buyers do not seem to be taking any extended positions at the moment. Sales figures from the US are backing the impressions that there is consistent and regular interest, and trade and the markets are in what seems to be a reasonable balance. The leather business has recovered a year after the collapse and supply and demand are in balance for now. It will be interesting to see how things develop after the Chinese production season for the New Year shopping period is finished, because export sales have still recovered far less in China than the domestic business has.

The kill: Despite rapidly falling temperatures the kill has not improved. Beef sales are still not really increasing. Furthermore, weights are not showing any of the normal gains for this time of year. So we will have still to wait for better times. It is also interesting that the proportion of males in the slaughter mix remains well below the normal averages. This should normalise eventually.

What we expect: The support needed for the cow market had been seen this week and has finally brought this market segment into balance. All that is needed now is a final adjustment in abattoir prices to bring the domestic market back into line with realities. As already mentioned, it seems that in the perfect world the market would now settle and remain on present levels for the rest of the year. Chances are fundamentally good and for the time being there is no indication of anything that could disturb the balance except the currency.

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