What happened this week: After a long time with little excitement the situation has become more interesting. It is not very often that the hide market actually moves in different directions, but this is the case at present and can be attributed to regional reasons. While our assumptions on the trend for average and standard materials continues to materialise slowly but surely, the hide market’s ‘island in the sun’ of the past has been facing increasing clouds and there may even be a little thunderstorm on the horizon. Extra heavy bulls, and in particular those at the higher quality end, are facing massive resistance from tanners and the price trend is moving south.

At the same time we saw an active round of buying from Asia this week with strong tailwinds from a firmer US$ and a firmer US market in general. And although the strong resistance to higher prices persists, bids are becoming less aggressive and negotiations are getting shorter. Terms and conditions are also becoming easier to settle. The strongest indication for a better tone in the market is, however, the reasonably short shipping times requested. So, for the coming four to six weeks one can assume that there will be a decent clearance of existing stocks and productions – except for the categories mentioned above that are struggling.

It will be very interesting to see how long and far this bi-directional market trend can extend. The next few weeks will be particularly important in terms of interest and demand from overseas as one has to conclude that the appetite of Asian tanners has not yet been fully satisfied. Buyers are still acting cautiously, because they know very well that the market could quickly overheat and the time leading up to the Hong Kong leather fair has been pretty tricky many times before. The long, global holiday season is over and productions are in full swing with better order books than many are willing to admit. The problem these days definitely lies in the geopolitics. Increasing tensions anchored in the dispute over the cartoons published in Denmark could eventually become an increasing threat to global stability and trade. We hope this looks worse than it will eventually be. For the moment trade and activity remains unaffected and the consumer goods business remains in tact. Even problematical items such as lamb and sheep continue to benefit from the better conditions and some of the outstanding stocks could have been cleared recently. What is interesting is the fact that light material seems to have lost some of its steam that has been driving the market for such a long time.

Tanners are starting to monitor alternatives such as goats or heavier material to prevent any further price increases above the levels reached in the last few weeks. In any case we are still in the high season of production and in most cases it doesn’t seem that all of the tanners have disposed of enough inventory to cover more than the immediate future. The continued problems of profitability were, however, highlighted by the failure of a Dutch finishing plant during this week. Sales were fully sufficient again and were once again focused on the same items as in the weeks before. Prices were steady to fractionally higher

The kill: The kill remains at steady and low levels. The slaughter mix favoured females and dairy cows in particular. Weights continue to under-perform and we have no reason to see any change here. In fact quite the reverse is true as the approaching carnival season should reduce the number shortly.

What do we expect? We are quite optimistic that next week’s trading activity will also be decent and hides up to 40 kgs will continue to perform well. We will follow the performance of the heavy bull market with interest and wait to see how the tensions will be resolved. Fundamentally, in the short term we are optimistic for the market, although it is still going to be a hard job to convert this into notably higher prices.