What happened this week: We are now in the final lap before the Christmas break. By the end of this week almost all European tanners will have stopped their intake of raw material, which is a serious interruption of the ordinary product flow of fresh, chilled hides.

There are very few slots for shipments left for Asia, and generally shipments until the third week of January are interrupted too.
On the one hand it might be nice to have a break, and the staff in the shipping departments will have a chance to get on top of paperwork, but from a business perspective it is a challenge. The coming week with big numbers is going to be difficult, because most of the production will have to be salted. The market remains in a pretty fragile status.

One had the feeling that a week ago, when the US dollar was touching 1.22 against the euro, that some were believing that there could be a chance for a turnaround, but with the recovery of the euro and the slowdown of sales, most of the optimism is fading again.
No matter how many reasons can be found to justify a halt in the price declines, the general activity and the way demand, shipments and payments are going means it is very difficult to very optimistic.

Many are stressing the raw material warehouses in the main tanning centres are pretty empty and tanners are short of hides. However, this has been said for a little while, and it might even be true. There are a number of reasons why the warehouses might be empty. Either the tanners are short of orders, or they are short of money and are simply not willing to buy, hoping for cheaper prices.
While in Europe, the supply pipeline is pretty short and the kill expectations are not showing any concerns about supply in the near future, the situation in Asia is a bit different. It must be a shortage of orders and/or money, because even existing contracts are not taken as quickly as they should be if the customer needs to replenish his inventories.

The time until after the Chinese New Year holidays seems to be covered and this means that until the middle of January nobody really needs to take a decision about replenishment. Except speculative buying of course, and you never know where this will take the market.

From the demand side, it is pretty clear this week that tanners are price conscious. Cheaper hides and lower selections are still moving quite easily and dairy cows are still considered an attractive option. Everything else above this price range is finding it much more difficult, with the only exception of the prime quality material, which is feeling headwinds but has a solid customer base.
However, selling and pricing in this prices segment isn't easy as can be seen in the veal skin market, where prices are substantially down. For others it is not as severe, but prices are slowly eroding. The weaker dollar this week has taken almost 1.5% away from the export revenues and so prices and returns have eroded across the board. There was a bit of business still to be done but volumes are very limited. There was some interest for low grades and dairy cows from Asia and some renewal of contracts in Europe added to a limited number of sales. 

The kill: We thought the kill would slow down this next week, but this was a mistake. Slaughter numbers remain extremely high and every butcher you talk to is not expecting them to decline next week and even in the Christmas week it seems numbers are going to be higher than in normal years. There are forecast for the first quarter expect the kill, in particular for cows, to remain above average. 

What we expect: Next week should be very quiet there might just be a chance to pick a sale of cows in China. In Europe we barely expect any activity at all. In a holiday-dominated market hardly anyone is going to change prices dramatically and so currency will possibly be more of a factor than the market itself.

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