What happened this week: This was the third week in a row where market activity was neither here nor there. Activity was once again mainly coincidental trading and the only regular sales were seen in the Italian market for cows. Some buyers are already considering purchases far ahead into 2006. Tanners in that part of the world seem to be the only ones carrying an extended order book at fixed price levels. It is pretty obvious that most of these orders date back into September/October and many will be for export to the US$ region. With the firmer trend of the American currency and a basically steady hide market since then, margins on the order book have widened slightly and tanners obviously prefer to secure the present conditions rather than to speculate on falling raw material prices.

Asian dairy cow buyers remained in even more of a ‘wait and see’ position. However, there was definitely some kind of a ‘sniffing around’ and some market research. It seems that tanners are still being affected by the discussions about the new tax regulations and they believe that this could eventually depress the hide market. This might or might not be the case, but their inventory position is certainly eroding and they will have to decide sooner rather than later what they are going to tan after the Lunar holidays.

The upholstery leather business in China might not be as good as before, but there is still a larger tanning industry with a certain level of demand and everything is pointing to the fact that upholstery tanners in that part of the world have lower than average raw material positions for average quality material at present. It has become a pretty common situation in the past few years that Asian buyers have tried to take advantage of Christmas season in the Western world for some bargain hunting and it would come as no surprise if this happens again this year. However, if our impression is correct - that most sellers have been readily redirecting their sales back into Europe and contracts have already been agreed into the New Year - an additional round of interest for reasonably quick shipments could find less material available than expected – at least for heavy female material. So, at the end of the day, most sellers are not too concerned about the cow market, while discussions are rife on the male side at present. As we are in the middle of another round of price negotiations for the European tanners for bull hides, tanners have positioned themselves early and declared anything less than a 5-7 % decline across the board as non-debatable, as they feel they have the upper hand with the high kill and the production break over the Christmas season. With the price range for this material being pretty wide, more adequate price adjustments need to be found to reflect the real market value of the male product range for the weeks to come.

The kill: This remains at pretty high levels, although the numbers from the previous week were not reached. So, our impression that we have seen the peak and will start to see a descent seems to be correct, however, we still think that the numbers will remain satisfying, until Christmas at least.

What do we expect? As already mentioned above, the market for cows looks pretty stable, although we believe that this applies in particular to the heavy end. The lighter more ‘Asian’ hides still need a round of buying until mid-January to finally get onto completely safe ground. The market price for bulls will again essentially depend on the results of the price negotiations with the abattoirs and the price developments in the alternative markets. Everything points in the direction of a very moderate descent.