What happened this week: If you are a fundamentally positive person and an optimist, it was possible to trace some of the improved activity expected for this week. However, if you were in a miserable mood, it was the same as the week before.

Basically there was no sign of any real ‘after holiday’ activity yet. And so one ended up hopping from one smaller sale to another and at the end of the week it added up to what must be called a satisfactory for the time of the year. It was nothing special, but neither was it the ‘zero’ event which can easily happen in the first half of August. There was no particular interest, nor were any market segments especially active and sales were across the board. Some lights, some cows, some heifers, some bulls were sold and consequently it was really coincidental. When it came to European tanners returning from their holidays or operating from the beach who had to deal with higher asking prices for heavy male hides due to the increases paid at the abattoirs, the range of reactions covered almost everything except friendliness and happiness!

Some decided to postpone the fight so as not to spoil their holidays, others were in a pretty bad mood and tried to find quick solutions and as a result some ugly arguments developed. It was a difficult situation for sellers, because the move in the north over the last months was still within a normal market variation, while in the south the jump was much more pronounced.

So, considering the moderate increases that were asked for, the excited responses expressed by some were difficult to understand. Anyway, we had expected this and it just goes to show that tanners are not expecting anything positive concerning leather prices. With deteriorating split credits and increasing raw material prices all seem to have accepted that production costs are not going to be any cheaper in the second half. After almost two years with falling or very stable raw material prices, they are finding it pretty hard to accept that there might be a period where raw materials are not helping their finances and might even eat into profits.

We did not have any reason to expect a firmer market, but the low slaughter numbers for bulls in May/June and the firm US$ combined with the structural changes in the abattoir market gave packers the upper hand for a short period and broke the market stability that everyone had enjoyed for a fairly long time. With the fact that some tanners felt the need to secure heavy, good quality bull hides they broke the status quo and agreed to pay higher levels some weeks ago which triggered the avalanche which we are now seeing which has brought a great deal of volatility back into the market for bulls and it is questionable as to whether this will benefit anyone.   

The kill: It is continuing to climb moderately. However, this means that most of the bottlenecks are resolved – at least until the fresh hides tanners are back from their holidays. With the reasonably cold and wet weather at present, it might continue to deliver acceptable numbers for the time of the year.

What do we expect? Well, some deals still remain open and need to be closed next week. We think that quite a bit of the excitement will slow down soon. We continue to believe that the cow market at least is mostly currency driven. The US$ has already lost another per cent this week and this means it is down almost 4% since the beginning of the holiday season. To believe that this will not have an effect on euro revenues would be naïve considering that the other markets are not showing a firm trend either.

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