What happened this week: After quite a lacklustre week it was followed again by some more activity this week. The firmer US$ is finally focusing more and more interest on European hides again and many Asian buyers are obviously using European hides as a safety net against the firm levels in the United States. It remains tough to negotiate, because Asian buyers are smart traders and many are trying to convert the firmer US$ into equivalent lower prices. A reasonable amount of hides were sold and in addition to the standard products such as dairy cows, the first serious interest in bulls was also seen from the Orient.

Continuing enquiries for light weight economical hides are also impressive. This must be fashion-based as it is coming from all kind of origins such as the Mediterranean, Middle and Far East. While interest from the Orient is not such a surprise in seasonal terms, the interest from Italy is astonishing if one considers that in about. 3-4 weeks production there will start to close down. The specialties such as high quality heavy and light material have been following their own paths for a long time now and are still enjoying more demand than supply can satisfy.

Apart from the general trading, the week was pretty full of general trading rumours, gossip and news. Domestically the trade was surprised by the news that the second largest European slaughterhouse business has expanded its processing and trading operations of hides through the purchase of a well- established German hide and skin business. This pushes the trend of further integration forward. At the same time stories were heard about the problems at a French group and the trade is discussing the acceleration of general structural changes in the hide and skin trade in Europe. This is not really anything particularly new, but it always comes as a surprise when things finally happen and there is now no question that the air is seeping out of the balloon of excessive processing capacities.

Looking at what has already happened in the last year and what seems to be underway, it doesn’t take much courage to predict that the trade will look significantly different in 2006. All of this combined with a sharp decline in the kill, at least in the Northern half of the country. A substantial number of larger abattoirs remained closed for several days during the week and also for next week the forecasts for the slaughter is not much better. This is creating the expected bottlenecks in fresh hide supplies, but hasn’t yet absorbed any of the existing salted inventories. Many tanners in Northern Europe are already looking towards their holidays and are consequently quite relaxed about the supply situation as such. Anyway, it will remain quite difficult until the slaughter numbers normalise or the demand is reduced due to the summer shutdowns.

The kill: As mentioned above nothing too positive to expect. Beef sales remain extremely difficult and domestic consumption is presently reaching seasonal and annual lows. This situation repeats itself every year and the low slaughter starts in June in the North before moving South.

 What do we expect? We find it hard to believe that the market situation will change. Heavy and high quality material will not face any price pressure and sellers might be tempted to ask for increased prices once again. Standard products, such as dairy cows will continue to compete with other options. The US$ closes the week on a weaker note and if this trend continues next week this is going to weigh heavily again on the mood and might create a negative sentiment.

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