What happened this week: Whenever it seems that market activity is finally falling into the summer apathy, interest seems to pick up again and weekly sales reach higher than anticipated levels. Interest was seen from all directions and this mainly focused on quick deliveries again. Asian buyers finally realised that July shipments were no longer possible and accepted August shipments instead. However, it is pretty obvious that buyers are trying to be as close as possible with shipments and, due to the insufficient profitability in the production of upholstery leathers, they are not willing to expose themselves any further than they have to. One can still sense the deep hope that hide prices will eventually fall to improve margins since upholstery leather prices still do not seem to be showing much flexibility on the upside, and tanners are suffering from higher raw material prices as well as general increases in costs.

Despite the satisfying volumes of sales, dairy cow prices are declining moderately, more as a result of the reports from the USA than a reflection of business as such. Towards the end of the week, the sharp correction of the US$ value added to the downward price pressure, and we would estimate that the price correction over the past two to three weeks has now reached a figure of 2-4 %. While in euros this was easily converted into €0.05-0.07 per kg, the reflection in US$ was much less as a result of the currency effect. In any case, pressure from the Far East will now also increase as they feel that, in sympathy with US prices, European cow prices will also need to adjust in US$ terms. The price adjustment also needs a significant correction at the abattoirs, where so far there has not been much of a reaction.

The situation is different for males (bulls). Due to the reasonable order situation for side leathers and the steady demand from automotive tanners, the supply situation still remains quite tight. Prices were completely steady or even advancing depending on the levels of the previous contracts booked. Most tanners are not even taking a summer break and will use contract tanning facilities so as not to give a hide away during their vacation time.

Despite the price adjustments on cows in the past few weeks, the fundamental market situation has not changed much and most reputable suppliers are still enjoying a good order book. In many cases, the holiday period is already covered with sales, so there has been little pressure to generate more sales so far. However, it seems that some of the B-league suppliers and less preferred origins in Europe are unable to report the same and this could lead to a side market with lower prices during the summer. In general, however, it seems that there is not much pressure yet and demand continues to be good enough to clear the reduced summer kill of hides.   

The kill: The kill was a little bit better last week without impressing anyone. It is still running at seasonally normal levels and is just about enough to satisfy the weekly needs for material. Over the next two weeks the summer holidays will be in full swing in parts of the country and this is unlikely to allow the slaughter number to improve.  

What do we expect: We see little reason why this market should move much. The pressure on cow prices will persist and even increase as the US$ continues to decline. If not, it is going to be bargain hunting time for tanners and they may grab a load here and there for less money without changing the market much. Males will hold their own since there are no excess hides around.