Within this market frame some other trends can also be determined. On one side there are tanners who had moved to more economical hides in the past that are returning due to sharp rises in the price of lower grade material, and on the other side we find tanners that have been on the high side of the quality end now trying to average down and to enter the average quality market. The result is the same as that which we have seen over the past weeks, the blanket can’t cover the whole table, and whichever direction you pull, something always remains uncovered. With all the positive signs in the market, it is impossible to ignore the clear warning signals. Among all the enthusiasm and short-term hype, which can’t be changed at the moment, the circumstances also have to be considered. We hear about more cases of payment delays in Europe and some smaller tanners seem to already be in serious trouble. Letters of credit are coming in far slower than in the first half of the year and the number of tanners disposing of sufficient inventories or considering production cuts due the insufficient margin situation is constantly growing. Short term, the driving force is still the shortage in some segments, but this effect can soon lose its momentum as it is hard to believe that many tanners around the globe still operate in the black. Negative margins at full speed productions have, in the long run, similar effects to unused production capacities. The negative impact on calculations for Chinese tanners with the reduction of the drawback to 8% will also have an effect. However, the immediate future will mainly depend on the outcome of the fairs to be held in the coming weeks.

Without any clear and pronounced signals for a substantial rise in leather prices, the present price levels for raw materials will kill the market by themselves. We have no idea about the time frame, but the correction is inevitable.

The kill: Another beautiful week with fine and warm weather allows everyone, from farmer to consumer, to think about everything but beef. This has led to lower slaughter and light weights. It seems we will still have some fine days ahead of us and this is unlikely to help the kill to climb substantially.

What do we expect: As yet there is no trigger to turn the price trend. We will still have to deal with the situation for a while longer and the strong order books continue to protect the market for the time being. However, the pipeline is preparing solutions for the margin problem and it might be wise to start thinking about adequate shelter for when the storm approaches.

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