Friedrich Sturm Report - 25.11.05

29/11/2005

What happened this week: This week was basically the same as the previous one. Sales were isolated and rather coincidental going to various destinations including some non-regular ones. The predominant area of interest – the only one where there was more than normal and consistent interest – was in low grades. Some ongoing gap filling for cows from Italy and renewals of regular programmes for males rounded up this week’s activity. Asia remained moderately quiet this week. So, adding up the numbers the week’s total was better than in the week before, but it can’t be said that business activity as such was really any better. Price levels were more or less maintained and variations versus the previous week were negligible. The holiday season towards the end of January is affecting today’s purchasing and shipping activity and it seems that most pipelines have been filled until the holiday break and buyers are not yet ready to make further decisions for the period beyond mid-February. So, this is a timing problem rather than a market problem as such. The leather business does not seem to be delivering any particularly interesting news.

It is hard to find anyone complaining about the shoe leather business while upholstery still seems to be a market of mixed emotions. While many premium suppliers are surprisingly complaining about insufficient orders others in the medium range - particular in Italy – are still busy.

The US$ remained trapped within the trading range of €1.17 and €1.18 this week and selling high and buying low remained the safe option again. In central Europe most of the players are now preparing for the next round of abattoir and general price negotiations at present opinions could not differ more. While the tanners’ consensus is that heavy male hide prices have to drop by about 5%, butchers (what a surprise) believe the reverse is true and the industry is torn between the two. Tanners’ arguments are based on tight margins, slower business, and a large kill with abundant supply. Those on the opposing side admit that there is a temporary abundance in supply, but they are forecasting a sharp drop in the New Year. Optimists looking at the cow market point out that there is a strong and persistent demand for cows from Italy, while the pessimists highlight the slower performance in the Asian market and the falling demand for light weight dairy cows.

The fact of the matter is that both sides have strong arguments in hand and it is going to be a rough road to find a general compromise and market level. One thing, however, seems to be clear: An upside potential can certainly be excluded as all attempts to push selling prices higher have failed, so, there are a great deal of indications the heavy steer market could face some temporary pressure while heavy females seem to have enough support to remain stable. Since there are no uniform conditions across the market, finding a balance could be even more complicated.

The kill: This week could have been the peak of the year. The kill was impressive despite the recent beef scandals in Germany. The weather has further deteriorated and this might keep slaughter levels high for some weeks to come, or even up to the week before Christmas. The high kill in November has a least made up for some of the reductions seen so far in 2005.

What do we expect? Things will remain quiet until the new price levels are set. Everything points towards moderate pressure on males, while females have a fair chance of avoiding such problems, subject to the US$ not losing too much value and the US market continuing its support.

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	Weakish
	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	Alerting
Thirds	15/+ kg	25.0/27.5 kg	13/+ kg	24/26 kg	€ 1.15	Steady
Thirds bulls	30/+ kg	38.0/40.0 kg	24/+ kg	33/36 kg	€ 1.15	Steady

Friedrich Sturm Report - 25.11.05 - leatherbiz: Lea

Intelligence

Friedrich Sturm Report - 25.11.05