What happened this week: We are finding it more difficult week by week to get a reliable reading of this market. In superficial terms it looks pretty simple: good-quality hides are well sold and sellers are pretending to be sold forward. Overseas markets are firm and are reporting similar conditions. The general impression is that hides have become scarce and that this will push levels into 2010.

For the top grades we would agree with this. There still seems to be enough need-to-buy and interest that people shouldn’t be too concerned about the near future. However, we are surprised each week by copies of offers and sales that are changing hands in many markets with good volumes, quick shipments and low prices. How this works into the picture we do not know. The only explanations might be that a number of suppliers have either been holding inventory and are now trying to take advantage of the market, or that hides that have not been good enough for buyers for a long time are now being dumped onto the market for clients who are still shopping around for bargains.

It seems it might be a bit of both. It is certain that the price spread we are seeing on similar descriptions is wider at present than it has been for a long time and this is always a good indicator that the positions of the various suppliers are different and/or that the goods are not comparable. Knowing that there were a number of questionable stocks and strong trader activity in surrounding (cheaper) countries we would not be surprised to learn that a number of hides from there have now found their way into the offers and shipments. Since we are already hearing a lot about claims and disputes for hides that arrived late in October and November and that these were hides sold and shipped under similar circumstances, one should not be surprised to see the same again.

Some may remember that at the end of August/beginning of September we had a similar situation. Due to the stupid situation in the abattoir market, straight offers had to be pretty high and around the time of ACLE in Shanghai, offers and sales were suddenly completed at market discounts of 10% or more. It was pretty obvious that either sellers were taking big losses or that they were taking the opportunity to unload old stocks which, under normal market conditions, would not have found any takers.

As a number of buyers in Asia were unfamiliar with what they should expect from various sources and at a large market discount, some were surprised to learn that there were still no miracles around in the market. This applied or applies mostly for traders/importers, because established tanneries already understand the market situation. It will be interesting to see whether the market hears similar stories again when the goods arrive, either just before the Chinese New Year or right after it.

Market activity was a bit mixed this week. Despite the fact there is not much to offer, buyers’ interest was a bit selective. Interest for heavy and good material remains pretty decent. Inquiries came from all over, but most were just hoping to find somebody selling top quality at low levels for quick shipments. We don’t think this was very successful. At steady money or minor counter bids there would have been a good chance to sell forward and interest would have been good enough to get well into the first quarter.

The news about the financial problems in Dubai only shocked the financial world for a moment before everyone went back to business as usual. One has the impression that the large gap between the view of the financial world and the one of the man on the street is widening. However, more people fear the next bubble and it seems there could be some risk of one.

Trading this week was limited to heavy bulls and some low grades. Interest for cows couldn’t be satisfied because of the lack of prompt availabilities. Limited stocks for prompt delivery are hindering sales activity. Prices were moderately higher, depending on the day and the US$ exchange rate.

The kill: The kill is now finally getting better. The weather is dreadful and the Christmas season is approaching. As a result, consumption is gradually getting better and the abattoirs are starting to fill their warehouses for Christmas and the end of the year. Weights are also moderately rising, but, particularly for cows, are still below the normal levels.

What do we expect: The year is now slowly winding down. The main point of interest now is what the mood for the first quarter of 2010 is. It would certainly not be healthy if the market were to be pushed much higher towards the end of the year. It would be much healthier if present levels could be maintained until we have a better picture of how the leather business will start the New Year and the new production season in Asia after the New Year holidays. Despite the liquidity-driven bull market we believe there are still quite a few obstacles around. Although this opinion is not too popular at the moment we continue to prefer caution over risk until the end of January.

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