What happened this week: Another week of reasonable activity, but it was not spread evenly over the days. It was a bit ‘on and off’, but counting the numbers on Friday afternoon it was fully satisfactory. Sales this week focused on male hides in particular. Regular programmes in Europe laid the foundation, but a round of interest from Asia for prompt shipment added to the activity. No matter, what other people are reporting we have the impression that European bulls are an attractive alternative again and a good option to fill one or two of the gaps which seem to exist for prompt shipment to the Far East.

Interest in cows was mainly focused on the heavy end and was equally divided between the East and Europe. Demand for light weight calf and kips remains very solid and strong. Anything below 10 kg and even 5 kg is in excessive demand. All this comes as a bit of a surprise. With high energy costs and a questionable outlook for the US economy one can only be positively impressed by the constant demand for raw material which must be a reflection of the leather orders obtained by tanners. It can only be the result of deflated inventories from the summer or – at least in the case of our hides – of a shift in the leather market to more medium quality leathers. It is hard to believe that there is any kind of shortage of lower quality hides. But, nobody can talk of a shortage of hides nowadays except for the small niches described above. The question now posed is whether we are at a market junction? Despite all of the arguments for persistent pressure on raw material prices due to higher costs the only real determining factor is the balance between supply and demand and – at least in short term – the profitability of tanners. So, the questions remain as to whether the market is following the pattern seen for the last two years and that tanners have been using the last few weeks to replenish their stocks and will now refrain from buying, or if there is an additional short term need to buy hides and whether this will drive the market higher? The latter is hard to believe at present.

We can sense a certain return of leather demand from China in the traditional markets as today’s demand seems more evenly spread across the globe than it has been in the last year. Some return into Italy, for example, would not create extra demand, it would merely lead to different distribution moving the focus away from China slightly.

The next week should see a little lull, as Chinese businesses are taking a week’s vacation and European tanners should have saturated their short term needs. Towards the end of the month, in conjunction with the Bologna fair, the picture for the future should become a little clearer and some of the mystery should lift as to where we are heading. Prices remained absolutely stable in all categories for the week, helped by the stable and firmer US$.

The kill: The kill remains stable and the change now from warm late summer weather to rainier, colder conditions should support the slaughter and keep the kill at adequate seasonal levels. Later in the month we should see another rise to the annual peaks.

What do we expect? We think that the market will take a break next week. It does not seem that tanners would really be impressed by higher asking prices and they will most likely refrain from buying if they are confronted with increased levels. Sellers also seem comfortable and consequently little price movement can be expected with the only exception being light material where anything can happen. We still remain cautious and do not really believe there is a chance for any major price movement until the end of the month.