What happened this week: The idea of ‘slow motion’ we expected described the market activity pretty well. But ‘slow motion’ is not ‘no motion’ and again sales were added to towards the end of the week which gave a better impression of the state of the market than we had had during the week. There is little to say, because we are in a period where sales activity is winding down and the level of activity is slowing. So, it has become a matter of comparison with the past when it comes to making a judgement of the market today. Looking at the facts, the market is still in reasonable shape. The order books are still good enough to clear the present production and to prevent the accumulation of stocks in the warehouses, and this will certainly apply for the next few weeks to come.

For August and onwards the situation still remains pretty unclear. The global leather world is speculating that raw material prices are going to ease and tanners are convinced that they will have to spend less money during or after their holidays than they had to pay in the second quarter. As usual it is always a threat when almost everyone thinks the same. Market tension will grow, because as we progress into the holiday period as week-by-week it will become more and more a case of strategy, waiting to see who will make the first move. The market cannot be generalised either. While the outlook for shoe and bag leathers remains very positive we all know that the situation in upholstery is a different matter and that leather prices are significantly more sensitive. There are plenty of rumours circulating the trade that upholstery manufacturers are complaining about a massive shift towards fabric and artificial fibres. This seems to be a little early in the season, but could be an indication of a possible risk for upholstery-related hides. Whether upholstery tanners cut their production due to a lack of margin or they cut soaks due to a lack of orders, the consequences will be the same and not all of these hides could be redirected into the buoyant side leather market. So, there is a reasonable chance of a two-fold market development until the situation is sorted out again later in the year.

This week was still determined by another round of gap-filling activity. The firmer trend of the US$ helped towards the end of the week and compensated for one or two of the moderate price concessions that had to be made. Most business was concluded overseas while price ideas from Italy were already anticipating what the buyers want to happen a little too much. This applied, in particular, to dairy cows, while the situation for males and ox/heifers remained more supply-driven and prices did not move at all. Demand for low grades remained strong with tanners trying to escape from their margin problems by buying lower grade and cheaper material. Calf and kips are also slowing down after the excitement of the last season.

The kill: Still remains quiet. The hope of a boost as a result of the World Cup and higher beef consumption did not materialise. In fact, it has helped the sales of pork in particular. Next week the school holidays will start in the first Federal States of Germany and this will depress the slaughter further. Until mid-August we should not expect much change. Reduced slaughter with low average weights as every year.

What do we expect: Everything points in the direction of a crumbling price situation on dairy cows. This should be nothing too drastic, and there is likely to be a smaller correction possibly cushioned by the currency. The market for males is still on steady ground thanks to the supply side and it doesn’t seem that this is going to change soon. The market heat is gone and it is time to take a deep breath and think about September.