Friedrich Sturm Report - 11.11.05

14/11/2005

What happened this week: This week we eventually got what we’d been asking for in the last one. It started very quietly at the beginning, but as the week progressed further, more activity started to come in. The Asian buyers, in particular, woke up and with the support from the US market and, with the increasing value of the US dollar, interest increased constantly from Wednesday onwards and the week finished on Friday with quite a number of bids to choose from. Finding the right prices was not particularly easy, because most Asian buyers are now buying on extended terms and are finding it pretty difficult to understand that re-financing costs have more than doubled over the past year. However, at the end of the day, deals were made and sales on Thursday and Friday were fully sufficient and enough to clear the week’s production.

Most of the interest focused on heavy cow hides, and so it appears Asian tanners are following the fashion for heavier hides which we have already seen for quite some time in the Italian market. What was interesting was that there was also some improvement in the number of enquiries seen for bull hides, which, at the end of the day, is no surprise considering that US steer prices are also moving up in the north. This week was another classic example of how the Asian buyers are not smart buyers dealing on a falling market, they always need the fear of higher prices to really increase their purchasing activity. Before people get too enthusiastic, it also has to be said that the higher levels of interest have not yet been converted into higher prices. Tanners are fighting to keep raw material prices under control and are not giving in easily when it comes to higher asking prices. So, it needed the firmer US dollar and the support from the US market to finally move buyers’ ideas to the levels that we have been seeking for quite some time. The interesting factor will now be now whether this was just a flash in the pan, or if the demand and the need to buy can also be carried over into the weeks to come.

It seems that some tanners at least do not have the inventories they would like to or what they need and are now trying to rush into replenishing stocks at the current market levels. If we see one or two more weeks with a good level of interest and a firm US$, sellers will definitely be tempted to increase their asking prices and then it will be interesting to see if tanners refrain from following the market when it passes a certain level - as has been seen many times recently. To sum up, it is at least positive that some of the Asian buyers have returned to the market as it puts the dairy cow market on safer ground. It is definitely still too early to get excited, but the conditions have, for the heavy female material at least, improved. For the rest of the market, more demand and sales are still needed for the sentiment to spill over into other sectors.

The kill: Nothing really new to report. It is the killing season and farmers and butchers are doing what they always do at this time of year. The level of kill for cows could still be somewhat better, but the male kill is at high levels, which is already fuelling concerns over the supply situation for the beginning of next year.

What do we expect? If the US$ extends this firmer trend and Asian tanners continue to keep their eye on European material to keep the US market under control next week, it will give many suppliers the confidence to test the market for higher levels. So, we would not be surprised to see asking prices for dairy cows and heifers rise, while we feel that a rise in price for bulls might not be appropriate as yet. There is still a temporary surplus around and this is not likely to change before the end of the year.

Type	Weight range	Avg. green weight	Salted weight	Avg. weight salted	Price per kg green weight	Trend
Ox/heifers	15/24.5 kg	22.0/23.5 kg	13/22 kg	20/21 kg	€ 1.55	Steady
	25/29.5 kg	27.5/28.5 kg	22/27 kg	25/26 kg	€ 1.40	Steady
Dairy cows	15/24.5 kg	22.5/23.5 kg	13/22 kg	20/21 kg	€ 1.50	Steady
	25/29.5 kg	27.5/28.5 kg	22/27 kg	25/26 kg	€ 1.32	Steady
	30/+ kg	33.5/35.5 kg	27/+ kg	29/31 kg	€ 1.20	Steady
Bulls	25/29.5 kg	27.5/28.5 kg	22/ 27 kg	25/26 kg	€ 1.62	Steady
	30/39.5 kg	36.0/37.0 kg	24/34 kg	31/33 kg	€ 1.52	Steady
	40/+ kg	45.0/48.0 kg	34/+ kg	38/40 kg	€ 1.44	Steady
Thirds	15/+ kg	25.0/27.5 kg	13/+ kg	24/26 kg	€ 1.10	Steady
Thirds bulls	30/+ kg	38.0/40.0 kg	24/+ kg	33/36 kg	€ 1.10	Steady

Friedrich Sturm Report - 11.11.05 - leatherbiz: Lea

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Friedrich Sturm Report - 11.11.05