What happened this week: It was another reasonably quiet week. Due to the public holidays in Europe on Monday and Wednesday and the ongoing abattoir buying, activity was depressed quite significantly. Asia was also fairly behind the average activity seen in the first months of this year.

The fact that the value of the US dollar is constantly declining is also weighing on calculations, so that we are not particularly satisfied with the week. Selling hides was again a subject of active sales activities and not just a collection and decision on interest or bids. Therefore most of the sales were bits and pieces of cowhides and low grades.

The most interest and work this week was again concentrated on the sidelines, such as sheep, lambskins, but also on low grades of calves and kips. The majority of the market opinions are either guided by supply or demand. Many are focussed on the supply side and are arguing with the low kill and available numbers. Others are concentrating on the demand side and pointing to the low production season and the fading demand towards the summer, in particular from Asia and also from Italy. At the end we feel that, at present, supply plays a more important role, but can not be generalised for all hide types. The regular production of leather from bullhides is strong enough to absorb the production and any extras available will continue to support prices.

We feel the situation is the opposite in cows, as supply is adequate and any interruption in sales and/or shipments will have negative impacts on the market levels, not to speak about the potential influence of the US dollar exchange rate. As a consequence, we feel that the markets are once again becoming increasingly volatile. The global demand for and the outlook for leather business remains intact, but a positive base is no longer enough to justify a bullish sentiment for raw material prices.

The market was a bit nervous by the mid-week, due to news reaching the public that beef, pork and poultry imports into Russia would be stopping for 11 EU countries. This could have had a negative effect on slaughter. This afternoon we hear that the problems are solved on a political level and imports are going to resume with immediate effect. 

The kill: After last weeks surprise figures, numbers eased again this week – in particular on bulls. For the next 8-12 weeks we will be in the low season and so levels will remain low and changes will be more coincidental. What do we expect? We are a bit confused as one can easily understand, that the market players don’t see it all the same way. The low kill and isolated demand is creating a more positive sentiment, than we feel is justified. We already said a while ago, that the market should have held March’s price levels until the end of the summer. This was a price level basically adequate for everyone and with little risk involved. The movement of abattoir prices in April and the short term optimism in Bologna destroyed the equilibrium and this has not yet been restored. Short term we believe that cow prices will face pressure, while males will be well supported.

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