So, we have the usual market conditions where prices have been too high and tanners feel there could be hide accumulations which could force buyers to consider lower prices in order to move their production. In the end, we are seeing completely normal market development. With the fundamentally strong global economy, the market has been riding a wave of orders and optimism for a long time and overlooked the changes in the fundamentals. At the end of the season the market always tends to overshoot with an empty pipeline and a certain supply scare on the buyers’ side. However, the markets remain cyclical and the economics of profitability are also playing a part.

 So, we have been in correction mode since April with those categories with value issues having to adjust the most. There is still little change in the high demand for leather; there is a shift in markets, but not a shift in demand, as such, and the ‘good names’ continue to ship according to schedule. China is tightening its liquidity supply and pollution control, and the RNB also continues its ascent under orderly governmental control. This is not creating any short-term crash potential for the commodity market, but it is deflating a lot of excess capacity in the medium term and will balance demand and capacity more successfully. As far as the leather market is concerned, there is little to report at the moment.

Most people are busy administering the existing situation rather than worrying about the future. The market balance has changed slightly due to the season. Because of the longer lead times and different timings, dairy cows are still receiving decent demand and, despite the interest in driving prices lower, buyers are still in the market to buy their favourites. Standard shoe leather hides are still finding more resistance but, in the end, present production can still be placed week by week. So, from our perspective, there is no more market risk than the normal correction, which might be necessary due to global developments. We must keep a watchful eye on the currency situation.

The kill: It is May and this speaks for itself. The kill is low, holidays are cutting weekly productions, weights are falling and nothing will change this for the next four to six weeks. Milk prices for farmers are rising at the moment and this could hold more cows away from the abattoirs in the coming months, in addition to the seasonal effects.

What do we expect: Our market is under global control and, consequently, has to adjust wherever the global markets are adjusting. So far, there has been little threat for the standard items and the currency assistance has also been protecting against more extended price reactions. So, we now have to watch the movements of the other markets but, in the short term, prices should remain on the weak side of the small downtrend corridor seen in recent weeks.

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