What happened this week: The march of the Oriental convoy continues, but a headwind is creating tough resistance and advances are becoming increasingly harder….this is the message of the week. Our concerns that the level of interest from Asia could be temporarily interrupted did not materialise and bids and interest continued this week. With a stable US$ and slightly improved bids some business – in particular for dairy cows – was concluded. However, looking at the fundamental firmness of the market it is still extremely difficult to convert this into higher prices. We have made progress since beginning of the year, but the extent is small considering how active sales and shipments have been.

This confirms that market players are not yet fully convinced that the market average in 2006 will eventually settle at higher levels than in 2005. This is not only wishful thinking on the part of the buyers, but the sellers have also preferred to keep the ball rolling and keep the production flow rather than betting on a bull market with much higher price levels so far. This kept prices under control with little variation. One slightly worrying fact is that the security stocks and inventories are quickly melting away and shipping requests are still far above average and if nothing happens March is going to be a very busy time for the shipping departments. Most of this is certainly related to the delayed purchasing decisions from many who were betting on a market effect related to the import tax policy in China. In reality this had no effect and so many had to rush to cover their needs for prompt shipments with a 4-6 week delay.

The hides which did not go to Asia at the end of 2005 found a ready market and shipments into other markets, so that pressure on the market has built up. In the meantime leather business has also proved to be better than expected. For the moment it seems that there is no negative news to influence the markets anymore. Neither the anti-dumping import duties that are likely to be imposed by the EU against China and Vietnam nor bird flu have created a negative sentiment in the market. In an attempt to keep prices under control Asian tanners are now approaching the entire trade trying to find suppliers that are ready to accept aggressive bids and the extent of traders’ interest was impressive this week.

One can only hope that these are not short sales which need covering as these will not be filled, at least not through regular supplies. Sales during the week were again dominated by dairy cows. Although heavy ones are still dominating, lighter weights are also finding homes in the market and cows are being increasingly used in shoe and bag leather productions. Bulls are benefiting from the low kill and inventories are being used to compensate the lower slaughter numbers.  

The kill: Still no changes. Abattoirs admit that the demand for beef is good, but they cannot find enough cattle at the right prices to meet the market demand. This sounds familiar in other markets too. The kill should stay on the low side of steady due to carnival and has a chance of improving after that, as it be should be needed and appreciated.

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