Friedrich Sturm Report - 13.07.07

17/07/2007

What happened this week: Slowly but surely the market seems to be settling down and sorting itself out. The panic seen in some markets appears to be calming down and suppliers are now realising that they may have been overshooting on the downside as they had previously done on the upside. The biggest threat for European suppliers this week has been the steep decline of the $ versus the €. This has made calculations in the overseas markets more difficult again as it is quite impossible to raise $ prices against the general market trend. So, despite problems with calculations and the weak $, sales have not been bad. Demand is still reasonable and, except for heavy ox/heifers, the demand situation is steady across the board. More and more inquiries are now being seen for September and even October shipments and/or deliveries. Some of these are smart buyers that have been known to buy when the markets are right.

In our case, we are not willing to take any further forward position and have now stopped additional long-term exposure. This may be a risky policy considering the $, the high level of uncertainty about the US consumer market and the problems in the Chinese tanning industry, but cheap selling is always an option. Although there is presently very little hope for a short-term market consolidation, it seems that the balance between supply and demand has been reached for raw material and it is encouraging that contracts are still being honoured and that shipments have not slowed down at all. There is very little to gain in this market anyway. A significant short term rebound in prices is very unlikely and trading activity will decline as a result of the summer holidays.

So, it appears that the best option is to choose what fits in the coming weeks, to keep an eye on buyers from the Orient in the near future and for the rest to ‘wait and see’. If the market falls, September is still early enough to dump the material. Sales were quite satisfying again this week and both low and heavy grade bulls did well. There was a moderate slide on prices but, in view of what other markets are reporting, one cannot really complain. With the exception of Italy, almost all destinations were on the list, which is not a bad sign. So, the mood is far worse than the actual situation. The most critical issue now is the adjustment of abattoir prices to our, and to the global, market. We are well overdue a major correction that would bring the abattoir levels back to safe ground before the end of the summer holidays. As usual, we are still finding people who, for whatever political reason, are not facing up to the market realities. This just lengthens the struggle even when the market is in decent form. The market will sort everything out in the long term anyway.

The kill: The kill has not changed much and will not change for some weeks. We hope that numbers will rise again from the end of August. So far, May slaughter statistics have been released and, with a good drop again for May, the annual decline has now reached 4.2%. Weights, which had been above average for some time, have fallen.

What do we expect: We literally expect nothing in the coming weeks. Trading will be thinner and thinner and there is very little that could move the market. Perhaps the exception might be the $ if it reaches 1.4, or any other movement in the financial markets. As far as hides and skins are concerned, it seems that the best course of action is to go on holiday and to occasionally check faxes and post to see if anything has come in from overseas. There is little to be expected from Europe.

Type	Weight range	Avg. green weight	Salted weight	Avg. weight salted	Price per kg green weight	Trend
Ox/heifers	15/24.5 kg	22.0/23.5 kg	13/22 kg	20/21 kg	€ 1.70	Pressure
	25/29.5 kg	27.5/28.5 kg	22/27 kg	25/26 kg	€ 1.55	Pressure
Dairy cows	15/24.5 kg	22.5/23.5 kg	13/22 kg	20/21 kg	€ 1.63	Weaker
	25/29.5 kg	27.5/28.5 kg	22/27 kg	25/26 kg	€ 1.46	Weaker
	30/+ kg	33.5/35.5 kg	27/+ kg	29/31 kg	€ 1.30	Steady
Bulls	25/29.5 kg	27.5/28.5 kg	22/ 27 kg	25/26 kg	€ 1.65	Weaker
	30/39.5 kg	36.0/37.0 kg	24/34 kg	31/33 kg	€ 1.58	Weaker
	40/+ kg	45.0/48.0 kg	34/+ kg	38/40 kg	€ 1.43	Weakish
Thirds	15/+ kg	25.0/27.5 kg	13/+ kg	24/26 kg	€ 1.25	Steady
Thirds bulls	30/+ kg	38.0/40.0 kg	24/+ kg	33/36 kg	€ 1.25	Steady

Friedrich Sturm Report - 13.07.07 - leatherbiz: Lea

Intelligence

Friedrich Sturm Report - 13.07.07