It goes without saying that the market is not in a uniform position. The extra heavy weights, which are entirely focused on their handful European customers, have already taken a break and prices have been corrected moderately and quietly in recent weeks. The same applies for dairy cows which had to adjust due to the dwindling demand from Italy and the fall in the value of the $. This is not overly significant, but shows a short-term break in enthusiasm at the least. It confirmed that the upholstery business is facing the strongest headwinds yet again and, without the support from vegetable tanners—which was the additional supportive factor in the last quarter 2006—demand is not strong enough to drive the market of upholstery-related hides in Europe any further. The price factor can also be seen in the continuing shift into lower price raw materials reflected in the demand and price increases of hides in South America.

In addition, tanners in Europe are also trying to hedge currency risks by buying in $ against their finished leather exports. We continue to see a better performance in side leathers, and this backs up the argument of our more optimistic segment. Full order books for shoes and leathergoods still need raw material coverage and the raw material markets that are most focused predominantly comprise the optimists. As a consequence, everybody feels comfortable and will continue to lean back and wait until things start to move in their favour. Under these conditions it is pretty difficult to push the market out of the trap we are in and people need to analyse whether their individual sale/purchasing position is affected in the short term. It is worth mentioning that more and more upholstery wet blues are on offer in the market. It seems that some tanners and traders would like to liquidate accumulated stocks in order to raise cash. Sale prices during the week were slightly lower for cows and overweight bulls and steady for the rest.

The kill: With the carnival festivities in full swing, the kill remained on very low levels across most of the country. A moderate increase is likely for the next week. This is also necessary, as supply would otherwise become the driving force again.

What do we expect: Neither supply nor demand are presently strong enough to push the market to any substantial new levels. With the return of the Chinese, we will have more of an idea about their need-to-buy situation soon and this will tell us what to expect until the Hong Kong fair (APLF, March 28-30) and the second quarter. 

 

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