What happened this week: We are now entering peak holiday season in Europe and this was reflected in this week’s business. Sales could be affected but, due to the low kill and uncertainty about the future, it may be advisable to sit tight and wait until production numbers return to normal again. Since there is very little indication that there will be a sharp downturn in leather and, consequently, hide demand, sellers would not be taking a great risk if they were to take a break and wait until production figures start to become clearer again. For the time being the low kill remains, leaving little room for any extra deals. Interest materialised from all destinations, for dairy cows in particular.
Most regular clients from Asia and Europe are still trying to push for sales for August and September shipments. If there is to be any focus on special material, one has to say that the demand favours heavier weights rather than lighter ones. No matter how many reports describe the markets, the regular and large accounts do not seem to have their pipelines sufficiently filled up again yet, and would take significant volumes at steady money for August shipments. This has tempted sellers to think about higher asking prices. It appears there has been no harm in trying, but when more money has been requested, tanners have been sitting tight and refraining from buying, simply because they will be able to buy expensive hides at a later date. Taking all this into consideration, it appears we will remain in the same narrow price trap we have been seeing for quite some time, and the weekly gamble on the currency market is actually capable of adding more to the returns than the long and monotonous negotiations about sales prices. All this is particularly applicable to dairy cows and ox/heifers, while the market for bulls will be determined after the return of the tanners in Europe. Nevertheless, there is no reason why this market should be any different from the others.
The main question continues to be how the leather market fits into all this. Whoever one speaks to, there is no sign of any increase in leather prices to compensate for the increase in raw material prices and production costs. It is also interesting to consider whether a deteriorating outlook for consumer demand in Europe will eventually hit leather demand. It is still too early to judge at present but we know from the past how quickly this could impact the pipeline and how suddenly business confidence can turn into depression. This may still be a little far away at the moment and, although sales were rather spotty this week, this was due more to a lack of offers than a lack of interest. In summary, it could be said that what was offered was sold, and at steady asking levels.
The kill: Not much of a change here. There was a little improvement during the week, but with the persisting heat wave it is difficult to tell whether things are actually beginning to change for the better. After two or three weeks more holiday in Germany, things should start to improve in the north, while holidays have just begun in the south so the kill in this part of the country is likely to remain low for at least the next four to six weeks.
What do we expect: Next week should again be a repetition of this one and business will be determined by offers and asking prices. At steady levels, and with a stable US$, we should not see any change in values and availabilities should not be altered. The market would need a strong trigger to be pushed either way and it is hard to believe that this trigger is going to be pulled at either the end of July or beginning of August.
