What happened this week: The fight goes on. Tanners decided not to just surrender and defended their positions to stem the increasing threat of rising prices and today, when the smoke settled and the weapons were laid down, the results were seen. And everybody will claim victory. Tanners successfully kept the market at more or less unchanged levels and protected themselves against higher asking prices; and sellers will look at the sales made during the week and their comfortable position in combination with a low kill as a strong argument for their arguments in the near future. The week generated a fully satisfying round of sales again. Business remains focused on standard items such as medium and higher weight dairy cows and bull hides up to 40kgs. These grades have all become ‘global’ hides and with the present international price structure they can compete with their counterparts from other supplying regions, predominantly the USA.

As the US$ could not extend its rally and settled at a lower level for the moment some of the currency market influences were also softened. This only left a few hides - particularly the extra heavy or superior quality, expensive hides which still have a more regional outlet potential. With the progression of globalisation in finished leather manufacturing and the gain in technological knowledge and equipment by overseas tanners, it seems to be just a question of time before the last fortress of European tanners in the field of raw material supply will fall.

Some may remember the similar development in dairy cows over the past ten years and it only took a few years to lift the average weight of cows sold to Asia by a substantial number of kilos and took less than two years to qualify the Central European bull hide in the Oriental markets. We are not at that stage yet, but the initial influences can already be clearly recognised. Looking at the week, one can consider the supply side in a very safe situation and sellers can relax and do not have to worry about the two-week holiday in China. This leads us to the demand side and, taking a look into the medium term future, apart from the unquestionably positive outlook for leather demand, the problem of prices remains unresolved. Tanners are still struggling to obtain adequate prices for their products and the consequences can already be seen in increasing payment delays from smaller clients. If the price pressure doesn’t ease from either side, the market will sort it out eventually in the usual ‘cash way’. Demand this week was across the board again from the traditional buyers for bull hides in Europe and some late buying for cows from Asia and coincidental activity from the Italian customer base.

The kill: The optimists were disappointed this week. There was no improved slaughter and the kill remained at the low levels we have seen since week two. This may be related to the weather as snow and ice could be weighing on the pipeline. However, we don’t expect a better slaughter in the coming weeks as yet.

What do we expect? Overseas trading will be quiet next week. Some will travel to India for the Chennai fair to gather some more information about fashion trends and demand. Let’s see if the demand for lightweight material fades or shifts. In Europe the market is getting ready for the next round of abattoir buying where the opinions of the abattoirs and the leather pipeline should clash harder than ever before due to the current profitability problems.