What happened this week:  It was a bit of a peculiar week. On one side pretty typical for the time of the year. A number of people were already preparing for the holiday, which made it quiet. Consequently, business activity in Northern Europe was in pretty low gear the whole week and in many regions the members of the trade try to find new and adequate price levels at the abattoirs. The difference in prices between the various countries is widening again, which makes it more difficult for those who are in the upper band of the price range. Sellers which are focussing more on the European customer base are already feeling the effect of the upcoming holidays and a number of clients have closed their purchasing books for the time until their closures – at least those who are not solely depending on fresh, chilled hides.

The rest all seems to be related to market politics. It is pretty obvious that a lot of the prices and market conditions are dictated by individual interest and politics, and not so much by the simple market logic of supply and demand. There are people around who are trying to protect and use inventory positions, market strategies and long term intentions as an argument for price concessions. This was and is always part of the game, but the market does not allow price deviations for too long. So the real question is how the general market is going to develop and where prices will settle over the summer. For the moment the moderate slide of prices continues. The low season during the summer and the upcoming holiday period extinguish every attempt for a turnaround in the trend. Demand is, however, still consistent and strong enough to prevent from any slump in prices.

The open question whether the more expensive hides in Europe adjust the cheaper ones or whether the cheaper ones rebound shortly and adjust back to the more expensive ones. At the moment it seems rather more likely that the market has not found enough support yet to get away from the softer tone, and in the end it is best for everybody if the raw material prices continue the slow correction mood.

The low kill is protecting the market from big surprises on the downside and sales and shipments are still good enough to destroy any major concerns about prices in the short term. We have the impression that the market is now starting to get into a more sensible period. Over the coming weeks tanners in Asia have to decide their needs and replenish for the September onwards production. Tanners in Europe still have about another month to go. Raw material prices are not yet satisfying tanners’ calculations, and so many are still waiting on the sidelines to step in and replenish. It is also true that the general trend of the global economy is cooling down and the consumer product pipeline has been well refilled with the high level of production we have seen in the past months. Whether that finds enough follow-up we will only know after the summer holidays. Consequently, a lot points in the direction of a sidestepping market which will be affected more by currency movements or other external factors than the simple supply and demand balance.

Only a severe shortfall of beef production or larger speculative moves seem to be strong enough to trigger any stronger move in the price trend at the moment. For the time being it does not seem that anybody has the courage or ambition for such actions. Most tanners at least seem to be pretty comfortable with the situation as it is at the moment. Locally, people have been rather busier and concerned about the EHEC virus and its consequences. In a way it seemed not only to have impacted on vegetable consumption, but also on meat consumption too. Slowly things are starting to normalise and so should food consumption. 

Sales during the week were mainly focussed on Asia. By midweek we saw a flurry of interest and this led to tough and intense negotiations. The USD was helping at the end to lock the interest in and while the week was started with very ambitious bids, prices were in the end reasonably close to the asking levels. Any higher asking levels in USD to compensate for the midweek weakness of the US currency were totally in vain. Compromises were found and the majority of the sales were for female hides. Males for Asia are still far too expensive in relation to the alternative from other origins. It was also interesting that the impact of the customs investigations is so far less than one would have expected, despite the new stories which are still circulating the trades almost every day.

The kill: There is little to say about the kill. The numbers are low, the weights too and next week is shortened by another holiday on Monday. School holidays in the Northern part are beginning pretty early this year and anything but very low numbers until mid-August would be a surprise. Supply should consequently not be any threat to the market in the weeks to come.

What do we expect: Basically we have already described the situation and our expectations. At present there are hardly any arguments which could push the market out of the narrow price band. Males are still overvalued in relation to other markets, but there needs to be a correction at the slaughterhouses before the adjustments can be passed on to the market. Cows are not far from a realistic valuation and a moderate decline would make them competitive again in the present international price scene. We expect trading volume to be reasonably thin for the weeks to come and corrections more extended for males than for females.

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