What happened this week: As one could have predicted, we saw one of the weeks with the lowest activity so far this year. The peak holiday season in Europe plus some holidays in Asia left only scattered activity. Some sales were generated, but these were either regular, programmed renewals of existing long-term arrangements or isolated trades in light material. Some interest for dairy cows was noticed from Asia, but in view of the weak situation in the US cow market and the falling US$, it was difficult, or nigh on impossible, to find an agreement between prices bid and prices sought. Fortunately, we are reasonably well sold and in a position to hope for an improvement later in the summer.

We have always maintained the opinion that our market was either sheltered by the high level of the US market or supported by the rising value of the US$. Both factors are fading at the moment and considering that Asian buyers are not interested in entering weaker markets, preferring to stay in the safer, easier-to-handle, firm markets, the situation for females isn’t in the sellers’ favour at present. But, we are right in the middle of the summer and many are still convinced that there is still a need to buy in Asia plus some uncovered positions for dairy cows in Italy.

For North German cows we are even more cautious. The market has remained trapped within a price range of no more than a $2.00 variation per piece for almost a year now and even when US hide prices were much higher, there was hardly any room to advance in Europe. So, it has to be stated once again that any price movements that were seen were as a result of currency fluctuations and buyers had an easy time substituting their preferred origins with alternative sources if their price targets were not met. This happened mainly between European and US cowhides. The only question now is if the long term price band will remain at a low in the coming months. There is pretty good reason to believe so and we have to watch the currency market more than anything else.

For males (bulls) the changes in continental European processing and marketing structure are playing a more important role than simply affecting supply and demand. With the retreat of established operations and the appearance of new players, the market balance has been massively disrupted. Increasing competition between processors on the one hand and the attempt by packers, mainly in the south, to gain overall control of the heavy bull hide market on the other, are leaving their mark on the market and prices are increasing. While at present tanners appear ill-prepared to combat this situation, it is going to be interesting to see what their defence strategy will be in the fourth quarter. They will need good ideas and might be helped only by higher slaughter numbers later this year. Excessive fresh hide supplies will have the same effect as the fictional shortage is having at the moment. 

The kill: The kill has started to recover earlier than we expected and has been focused more in the north where the end of the holidays is already in sight. Cattle statistics released only show a decline of about 1% for 2005. There has been a significant retreat in bulls of more than 10 %, but the total decline is less than we had expected.

What do we expect? Next week will still be quiet, although tanners will slowly start to return form their holidays and from the week after next we will have more people to speak to once again. Our main focus will be on the currency markets and the activity from Asia, in order to understand what kind of price levels in euros we will have to expect for the rest of the summer until September.

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