Leather garments and the famous sheepskin boots are also in good demand and there is not enough raw material to cover production. On the bovine side it is not that hot. It seems that many tanneries have built inventories and supply positions than in previous years and this is definitely in response to the secure and generally positive outlook for 2011. Supply level optimism and hopes for the first quarter are running high and it seems that in Europe, a few stocks are already built with butchers and processors to take advantage in the first quarter of 2011. Whether this is true, and whether it will be rewarded are possibly the most important questions to be answered at the start of next year. If tanners have sufficient stocks for their production in the first three months, they will be pretty reluctant to accept any higher prices in January. However, in 'normal' years the tanners are in full swing of production in the first quarter, and therefore need constant replenishment so prices rise moderately into early spring. In the view of the strong leather demand however, there are good arguments for a repetition of the cycle in the short term – at least for the mid- and high-end of the market. For commodity items it might be a bit trickier. More and more manufacturers are increasing their consumption of leather substitutes and it doesn’t need too much courage to expect this trend to accelerate when the market realises that raw material prices are continuing to rise. The market for cotton and wool could serve as an example and warning for some and may push deciders to be alert for possible bad surprises in raw material price developments. We tend to believe that all will depend on the position of the leather pipeline and whether or not the inventory position along the supply chain has built enough buffer over the past months.

This includes not only the physical stocks, but also the contract positions. Chinese tanners claim to already be covered until March, which could allow some of them to stay out of the market for weeks in case the price challenges are too ambitious. This week, most people seemed not to bother too much anymore, and for the last two weeks of 2010 we would be surprised if that is going to change. As already mentioned, sales were rather patchy and selected, with only real price temptations making us trade. Prices were reasonably steady with some better levels achieved for specialities. Sales were done for cows while bull hides were on the sidelines for various reasons. 

The kill: The kill is still reasonable, but no longer as exciting as it was for most of the last quarter. The weather has had a massive impact, with ice and snow hindering transport. The Christmas season is starting to have an impact now with butchers starting to prepare for next week. Weights continue to be light for the time of the year. Next week should be another normal week with the holidays on Saturday and Sunday this year.

What do we expect: We believe that activity will be slow next week. Almost everybody is preparing for Christmas and the end of the year. European tanners are quickly winding down and will be closed for one or two weeks. Asian buyers are now busy planning their shipping needs, as they are on holiday for first half of February 2011 for the Lunar New Year. This means a pause in shipping activity around the end of the year and offers shipping departments a bit of a pause during the season. We would be surprised if the market gets any remarkable occurrences anymore until the end of 2010.

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