What happened this week: It was a week of mixed emotions. In general demand lost some of its steam and in particular the main driving forces of the past weeks, i.e. Asia and Italy changed down to a lower gear. Market activity and daily work, however, did not dry up completely and the demand for reasonably priced light weights remained very strong and the situation now is similar to how we finished before the summer holidays. Italy, India and China are still showing strong interest for these types of materials. This is good on the one hand as it confirms the solid performance and demand for leather to be used for leathergoods, handbags and shoe upper leathers. However, on the downside the supply base is becoming more and more limited. If this situation persists, tanners will eventually either have to change their raw material sources or discuss with clients as to whether they can use other, heavier and larger raw materials as well. Just looking back a year there was plenty of demand for the heavy end while the 15 kg down market was almost completely neglected. For standard items, many are busy analysing where the European market for bulls is heading. While there is a strong attempt to push the extra heavy end of the quality market even higher, many have started to question whether this is justified in light of the current leather business and whether this could run into a dead end eventually.

For the moment, structural changes in the continental European beef market are the trigger for several political and strategic moves by the main market players and we do not think that the present market volatility can be justified by the market as such. The present price spread between south German hides and the rest of the country has at least created the return of ‘hide cocktails’ as is usually the case in such a market environment. It is, however, pretty unlikely that this is going to last for long since the trade is too familiar with the situation. For the moment, tensions are high in this sector.

The rising interest in standard bullhides from the Middle and Far East is worth noting. For one reason or another there must be more interest for better quality leathers of higher substance, or a shortage of standard material which would normally be used. Quite a few loads were placed that lifted the sales pressure in the standard customer base a bit. Against all forecasts, the US$ exchange rate has become the friend of the exporter again. Some of the price reductions which have or had to be taken can be balanced by these kinds of windfall profits. Some of the focus on dairy cows led to some moves this week with Italy and Asia asking, but not buying much. It was less of a price issue and more likely a break after the reasonable activity of the previous weeks. One can at least believe that the inventory position is extended and, with a normal level of leather business, replenishment could well be regular in the near future.

The kill: Again nothing special to report. The kill continues to follow the seasonal pattern and is gradually rising, but in small steps. As one could expect, the process of consolidation is favouring the large businesses and the kill is concentrated more on the big slaughter plants.

What do we expect? Despite the turbulence in the south German market we feel that the market is in a decent balance at the moment. What is sold is also shipped and what is sold outside the regular delivery programmes is almost always quickly requested for shipment. However, the hides to meet these requests are available and there is no shortage with the only possible exception of light material. So, no reason to expect any changes as such.