While low grades and dairy cows are still in higher demand, heifers are not attracting enough attention because of lower prices in the UK, Ireland and the USA. The same now applies for lightweight dairy steers, which are also gripped in the tight control of lower price levels because of prices in competing markets. So far, our forecast from last week was pretty accurate.

So, we have benefited from the firm prices on shoe leather hides for a long time, but the umbrella has now been taken away and the rain is pouring down. Fortunately, the production of these critical grades is only a small minority of the total kill and cannot develop into a major headache. The key question these days is whether there is already any accumulation of hides around as this would come at a pretty bad time. Heading into the summer holidays in Europe, and with the subdued mood overseas, it seems unlikely that stocks could be absorbed in the short term. However, it still seems that the mood is presently worse than the reality of the situation. Sometimes we get the feeling that people have been spoilt by the extraordinary situation we had in 2006 up to spring 2007, where every single hide had a queue of clients looking for it. So far, we are merely seeing a situation that is fairly common in the second quarter in ‘normal’ years.

Due to a seasonal decline in leather orders, tanners can take a breather from their buying schedules and try to use this as a setback in prices to improve margins. This goes along with claims, complaints and all other methods of the psychological wars of the trade. So far, however, it has had little effect, as only the overvalued hide grades have had to go through price corrections. So, it seems more likely that structural issues will influence the market. The tax issues and pollution controls in China, another round of restructuring for the production chain in Europe and fashion issues are examples and these could create a number of short-term deviations in the market trend. Some short-term readjustments within the supply chain could be necessary and this often creates rumblings in the markets. However, it is hard to find any fundamental change in the global balance of supply and demand in the leather supply chain at the moment.

Sales during the week were again dominated by dairy cows and some gap-filling activity all over. There is nothing very exciting, and only a little pleasure derived from the currency market. Prices for the limited volumes of sales were steady, while the levels for the ‘no-go’ items continue to be anybody’s guess and it is probably better not to be forced to sell them at the moment.

The kill: There is no excitement with regard to the kill. It is simply oscillating around the level we have seen for almost eight to ten weeks. German slaughter statistics for April saw a 4.1% increase for the kill, but the annual figure still remains lower than last year’s.

What do we expect: The market now has to slowly prepare for the summer break in Europe. There are still approximately four weeks left for shipments and, after that, it will depend on Asia. We have no reason to change our outlook, which is for steady levels on cows and limited persisting pressure on the other grades which have been given a bit of relief due to the currency situation. 

 

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