What happened this week: The slow start to the New Year continued in the second week of 2006. All in all, the situation remained a little lacklustre. While in Europe most tanners are reasonably well covered with hides – at least until the end of February – the vast majority of Asian customers are still more ‘ante portas’ than active decision makers in terms of European hides. There is a strong underlying interest for dairy cows and in particular for heavy ones, but tanners are struggling to accept present asking prices and so the gap between buyers and sellers still remains. A few bids came in during the week, but only some were converted into sales. Either the goods were not available, or prices and currency positions did not offer any opportunity to make a deal.

Strong demand continues for hides suitable for side leather. All ox/heifer grades are still enjoying very good interest but, due to the low production of these grades in this area, it is not possible to take advantage of this situation, and production is also well sold forward. The first larger leather fairs will take place over the next few weeks and these might offer us some more indication about the leather business. The fair in Istanbul could suffer as a result of the avian flu outbreak in Turkey that may prevent some visitors from making a trip, although there is certainly no reason for this.

The fair in Istanbul could at least offer a better insight into whether the business in lamb and sheepskins has really finally passed out of its depression. With a marked improvement in interest from China for skins over the past week, it would be good to get confirmation that the increasing demand for leather garments is also spilling into the main production market in Europe. The week after this, many will travel to India and while one can be pretty optimistic in general about the demand for shoes and leather, it might be more interesting to look at whether the fashion and garment leathers move to indicate if we will see any major change for the season to come. Most pundits are indicating that nothing special will change and that styles and fashion will not alter much. However, this is hard to believe as light weight material prices, at least, have become too expensive and production would not cover another season with the same demand. Many forget that a lot of last year’s demand in the range of up to 15 kg was covered by stocks that had been sitting around.

As slow as the markets and business may seem, looking at the numbers sold during the week, activity was better than it appeared. The prices paid have continued to fluctuate in a range no wider than 2% for a long time, and this week was no different. While ox/heifer and lighter weight bull hides are on the firm side of the range, normal standard bulls remain totally steady with hardly any movement at all, and lighter weight cowhides remain at the bottom of the microscopic price range.

The kill: In the end the kill was somewhat better in the first week of 2006 and the final numbers were higher than our initial count. However, this week numbers fell significantly, in particular for bulls. We fail to understand why and so we are reluctant to guess what is going to happen in the weeks to come. In general, it should, however, be at reduced levels as is normal for this time of the year. 

What do we expect? If any of our readers can find an argument as to why prices should move we would appreciate them letting us know. The only short term possibility we can see, would be the currency market or an avalanche of interest from Asia before the holiday break. While the US$ is always good for surprises, it seems that the Asian customer base is not really ready to make large purchases at increasing price levels.