What happened this week: Well, things have certainly changed a bit this week. As has been the case for a long time now, the situation needed an outside trigger to bring about some movement and this time it was the hurricane which has caused worries for the US economy. This sent the US$ into freefall again and left it in a two per cent lower trading range in the second half of the week. Not, that any of the fundamentals in the leather business have changed, but psychology rules and all of a sudden energy costs and concerns for the outlook of consumer spending have moved into the foreground.

Looking at the facts nothing has really changed apart from the general sentiment. Interest rates continue to slide or to remain low, oil prices haven’t moved much higher than the week before and stock markets remained quite unchanged by the whole situation. Other raw materials such as metal continued their rise on the whole. For the micro-world of the hide, skin and leather trade, however, everything came as a welcome reason to get excited again and most reports and conversations showed an increasing level of uncertainty. Although looking at it rationally, for our trade fundamentally not too much has changed.

The psychological timing is not brilliant as the market – returning from the summer break – is always on high alert, and with the upcoming ‘get together’ in Shanghai hopes always run so high that they can only eventually be disappointed. The fact of the matter is, however, that the leather business is not doing too badly in general and it is more a timing problem than anything else. Furniture production will only get back up to full speed in October and there still needs to be a final confirmation of the general trends we will see. Apart from the types of leather used in upholstery, it seems that some of the focus might also move away from China again as one gets the impression that other traditional production areas might be set to win back some of their market share.

As far as business was concerned, the week was just about average. While for bulls and ox/heifers demand continued to be steady, the market for cows remained cautious. Some European sales for the heavy end and a few courtesy sales to Asia visiting regular clients have been the harvest. Prices were steady to firm for males and heifers and under moderate pressure for cows due to the falling US$. If there is anything in particular to mention it is the increasing interest of Asian tanners in bull hides from Europe. The trend towards better quality leathers requires many to check out more options in their raw material resources. With rising technical experience and support of the chemical industry the technical obstacles of the past are more easily resolved today.

The kill: The kill has also returned to normal levels with the summer vacations behind us. Weights are still quite low, but should also pick up soon. Nice warm weather is still preventing any further rise, but – despite the falling trend for slaughter numbers – production should be ok for the coming weeks. 

What do we expect? For the European suppliers the US$ trend and the response of the Asian cow buyers will be the key issues of the next week. Buyers have the psychological advantage and sellers have the currency market against them at the moment. Not good news for the euro revenues on cows. So, rocky seas in front of us for the coming weeks until things settle down after September. The market seems to be in good shape with most plans already made for shoes and automotive. We will know more next week.