Looking at the development in recent weeks it seems to us that we have created ‘market islands in the sea’ and there is now less equality than ever before for groups of European raw material producers. For example, it is clear that the privileged hides for cutting and vegetable use are taken predominantly form France. These have gained tremendous momentum, dragging a number of potential substitutes with them, which has propelled levels above their traditional outlets. As another example, some standard dairy cows that would normally end up in the upholstery tanners have found homes at price levels their regular buyers cannot afford. There are plenty more examples and this has managed to destroy a lot of the ‘market order’. This happens once in a while but it is hard to believe that it could actually become a permanent problem. It is also fairly obvious that non-regular players have pushed the market in some categories by supplying a customer base which would not otherwise have been supplied by standard suppliers at this point in time, mainly for financial reasons.

A tension in the market has developed as a result of all this as well as limited price levels which, in our view, are not justified by hard facts. Concerns are still present in the standard business society and people are openly discussing how some of the raw materials which recently saw the sharpest gains might now have momentarily seen the ceiling, while those that have been overshooting struggled to find a solid market level again. This has nothing to do with a market turn yet, rather it is more a way of shaking things up and bringing them back into order.

As far as sales were concerned, pretty little was happening in Europe, while Asia became a bit more active again. Some dairy cows, ox/heifers and lighter bull hides were sold and, as long as one sticks to an appropriate price level compared with the hide competition from the USA, sales can be generated; if one gets greedy and looks for too much, the orders are immediately withdrawn. Unfortunately, the $ lost some of its value towards the end of the week, so that the currency was also unable to assist in the calculations. In the end our market did not move at all. A few price adjustments with some regular buyers still need to be made, but it appears that volatility could be low for some time and it may be the middle of November before we reach another market junction. We continue to believe that the trend will eventually be determined by the depth of financial pockets within the industry. At present levels of profitability they may well become more limited by the week. 

The kill: What we saw rising the previous week we saw falling again this week. Mostly blamed this on transport restrictions and bureaucracy for live cattle due to the regional cases of bluetongue we had some time ago, which makes cattle trade and transportation fairly complicated. After another pretty warm and pleasant week, the forecasts are now becoming a bit more seasonal and this should increase the kill – but it is still not what it used to be.

What do we expect: There is no reason to expect anything special. Forward positions are still intact for most, but at the same time the trade is becoming more sensible. It seems that hardly anyone is expecting the market to be any higher until the end of the year. On the other hand, most are well sold and this continues to keep the downside potential at a low level. It would take something very significant to really make waves in the market in the short term. 

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