What happened this week: At the end of this week we reached ‘midsummer’s night’ which is not technically the middle of the summer (which is June 24), but the shortest night and the longest day (June 21). The ‘midsummer’ trade would typically describe the peak holiday season in Europe, sometime between mid July and the end of August. This means that market activity is about to almost come to a standstill, because the vast majority of the trade will be closed for holidays.

Shipments are at low levels and trading activity is almost nonexistent. We felt like checking the calendar this week to confirm that it is, in fact, still June and not August. Internet connections and phone lines were also double checked to make sure that there were no connection problems to account for the lack of communication.

The good news is that there was some movement in heavy hides generally. A number of buyers took the chance to grab a few loads of the heavy material at the corrected price levels and most of the weekly activity was related to the European customer base this week. Only the low grades were attractive to the Asian clients and a few loads found homes for the shipping frame until September. Asia, and China in particular, did not deliver good news. The poor sentiment in the US market and the new tax regulation in China, which takes effect July 1, created such a high level of uncertainty that Asian buyers are trying to postpone their purchasing decisions more and more in the hope of buying cheaper. So, stability in the market has finally been destroyed and it seems that we will now have to deal with a much higher level of market volatility again for some time. As so often happens, the breaking point came at the end of April around the time of APLF. This is not good news, because players become more nervous and situations and developments become less predictable.

However, the most interesting point is that the leather business as such is still not bad and we are simply seeing the final consequences of increased production costs and insufficient prices for leather, which is finally even impacting the Chinese industry. As far as sales prices were concerned, most of the contracts were still completed at asking levels, or slightly below, but this is only relevant for a few grades. The real price for the others is anyone’s guess. 

The kill: The kill remains pretty steady and the only surprise is the slaughter mix with plenty of bulls and only a few cows. For the first time in recent memory, the price for live cows is higher than for bulls. With the perfect conditions in the fields and rising prices for milk, we do not expect any short-term changes.

What do we expect: If the market situation in the USA is consistent with what reports and players are telling us, we will eventually not be able to escape, although the European market, and specifically the abattoirs, are still trying to close their eyes to it. However, another month like this and a slide could end in a slump, which will be to nobody’s advantage. It is slowly becoming like a risky poker game with very few winners at the end.