What happened this week: Another typical spring week is coming to an end. All market segments remain in low gear and sales activity was limited to the basic minimum which is, week by week, still enough to place most of the current production. With the low kill, the moderate activity of the regular clientele is good enough to prevent any major accumulation of hides. Consequently, the pressure on market prices remains limited to the price movements in the other big global hide markets, and so the international focus of the tanning industry lies on the descent of American steer prices, which are taken as a reference for the global price trend. This might be an argument, but it is certainly not that straightforward and the price variation cannot be transferred identically on all hide types. As far as we are concerned, the market pattern has not changed much so far.

Extra heavy hides are suffering most and, in all countries across Europe, one can hear sellers complaining about not selling enough of this merchandise, which has been the ‘darling of the market’ for so long. Since these hide grades are, in the vast majority, only sold to the European tanning industry, concerns are rising because the summer break is now approaching fast. Product that is not moved will be stuck in the warehouses for a while. The top quality and consistent suppliers are not suffering too much as they can rely on the core demand in the market, but the peripheral supply base, which is coming into play in strong demand periods (2006) to cover excessive demand, is getting a fair hit now. The standard, lighter hide grades are still not so bad. One has to fight with the general market trend but, in the end, demand is still pretty steady and prices are not under the same pressure by any stretch of the imagination. One must not forget that European prices have never reached such inflated levels as in the US and even today they are still fairly valued, even with some support from the currency.

As a result, price corrections have so far been limited and only a further steep correction overseas would lead to significant price reactions here. So far, calculations for hides are much more negatively influenced by the seasonal decline in hide weights and the reduction in heavy weight prices, which haven’t been reflected at all at the abattoir door until today and need adjustment in the month(s) to come. And so the market situation is much less dominated by the local market situation and position, but we just continue to follow the global market trends, which are certainly not too positive for the time being. So, if this trend continues we expect—leaving out the psychological effect—that declines exceeding 5% will also eventually have a direct influence on the price structure in our markets.

Sales during the week have been quite decent. Some business across the board added to fully satisfying numbers and is bringing our shipping programmes pretty well into the summer now. Cows are still selling quite easily in all directions. On the negative side, more tenacious L/Cs operations in Asia have been seen and this speaks for itself.

The kill: The kill remains on the low side. We had a round of heavy weight cattle slaughter last week, which is quite a surprise at this time of year. This will be temporary, but has obviously come at the wrong time. Who would ever expect to say this in May? Next week will be another short one with one less day, so there will be no stress on the supply side. 

What do we expect: Although there is still some pressure on the market, it would take a lot to change the mood again. Only a few weeks with sales well under par would create the necessary accumulation of material to justify any further and significant downward trend in prices for the time being.