What happened this week: The market continues to display a great deal of uncertainty. Activity increased a little after the US presidential election, yet nobody can be totally happy as the downward trend of the dollar has continued after Mr Bush’s victory, raising the pressure on prices in the euro-zone. More sales were generated with more interest, and selling pressure did not increase any further thanks to the selling volumes. However, margins in particular remain under pressure due to currency developments. Revenues in euros are either directly under pressure when selling to overseas markets, or indirectly, when hides are sold to tanners exporting leather themselves. One has to wonder how long the European industries can handle and cope with the massive disadvantages arising from currency relations - not only from the dollar but also from the pegged currencies such as the Chinese yuan.

With many companies forward covers will expire at the end of the year and new calculations on the present exchange levels will not be competitive at all. Many tanneries in Europe with a high proportion of exports try to protect themselves with purchases in the dollar but the production costs remain in the local currency and reduced import prices cannot compensate for this. Only time will tell.

In the meantime, the market remains strangulated by the situation and with every increase of the euro European hides are becoming less competitive.

As far as market activity is concerned, sales were affected in Asia as well as in Europe. Surprisingly, the main interest from Asia was not for the traditional dairy cows but much more for ox/heifers and bulls. We do not quite understand the reason for this because they are not the cheapest buy at the moment, so it must be related to either the demand for better quality or to a change in article structures.

Cows were dominated by the Italian market once again and further purchases were made without great enthusiasm. Prices did not fall substantially, but a bit here and there was enough to lower returns and to call into question the need for abattoir prices to be adjusted. No final conclusions with the abattoirs have been made yet but, as usual butchers are fiercely denying the truth and fighting for their own fortune in preventing abattoir prices from general market pressure. The outcome is still up in the air and we will be better informed by the end of next week. The leather business is still not at the levels one should expect at this time of the year, despite the moderate increase that one can sense.

The kill: Slaughter numbers remain at seasonal higher levels. It seems that we can still expect further increases and high levels for the rest of the month. We are still wondering if and when we will see the expected numbers of bulls due to arrive at abattoirs before the end of the year.

What do we expect? With the current level of the dollar, the pressure on hide prices will persist. The kill remains high and the demand is, at best, steady in the standard categories. Consequently, there is no room for higher asking levels. The further price concessions that need to be made, in particular for cows, will depend on individual inventory positions and on physical shipping volumes to the Far East. Delays in incoming L/Cs will quickly increase the pressure on sellers to move product, a bad thing at this time of the year.

 

Type	Weight range	Avg. green weight	Salted weight	Avg. weight salted	Price per kg green weight	Trend
Ox/heifers	15/24,5 kg	22,0/23,5 kg	13/22 kg	20/21 kg	€ 1,50	Pressure
	25/29,5 kg	27,5/28,5 kg	22/27 kg	25/26 kg	€ 1,40	Pressure
Dairy cows	15/24,5 kg	22,5/23,5 kg	13/22 kg	20/21 kg	€ 1,43	Pressure
	25/29,5 kg	27,5/28,5 kg	22/27 kg	25/26 kg	€ 1,36	Pressure
	30/+      kg	33,5/35,5 kg	27/+   kg	29/31 kg	€ 1,17	Pressure
Bulls	25/29,5 kg	27,5/28,5 kg	22/ 27 kg	25/26 kg	€ 1,53	Pressure
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