What happened this week: Well, the market really fell totally into the holiday mood we had expected for the week although activity—in particular from Asia—kept people more busy than was actually expected. Unfortunately the USD’s strength was only short-lived and the gains did not exceed the 1.36 mark so there was, once again, only a very small window of time to achieve a favourable currency position for the week. Consequently, there was little chance to convert the market activity towards better revenues. Anyway, it is better not to complain when product is still moving and sales can be considered as sufficient for the time of the year. Looking at the situation in detail, one also has to consider that the market activity was not spread evenly across the board, but mainly focused on cows and low grades.

Bids for bulls were plentiful, but prices form the Orient did not meet expectations and the price levels in the USA are still more attractive for many, not to speak of the volumes of consistent material that are able to buy over there. So, the huge export sales numbers reported from the USA were not really a surprise as tanners got what they wanted there and took the opportunity to secure what they were able to get from their preferred origin. The gap between what people were willing to bid for European males in relation to their US counterparts was about $2-3 per piece depending on the weight range, which confirmed our view about the need for an adjustment for bulls at the abattoir doors. However, there are still too many out there who believe that the ‘market superstars’ of the last cycle would not need any major correction. While selling prices have already eroded and there is little chance for a rebound in the short- term abattoir prices still need a final correction to bring them back in line with global market realities. However, one should also look at the positive signs in the confirmation of the current good demand reflected in larges sales from the USA over the past weeks, which has also protected the European market from a freefall in prices and has created a temporary safety net in the market slightly below the present levels which is not too bad for this time of the year. Furthermore, if things continue to develop in an orderly way, the necessary correction could be negotiated with butchers for August and we could start the new season at reasonable levels, with a much reduced market risk and, at the end of the day, little damage considering the pretty ride the market has had in the last quarter. It is almost too good to be true.

Anyway, there is a fair chance to roll this market out without too much turmoil and settle it at fair levels before we take a rest and to analyse the rest of the year carefully when the picture becomes a bit clearer with the return of the industry after the holidays. There is a good chance of having a solid basis going into the last quarter, but there is certainly no 100% guarantee, because there could still be a few traps on the way. Prices were incrementally lower for the sales during the week when the right timing for the currency market was applied.  

The kill: With the abattoirs now also in peak holiday season and the beef business difficult, the kill remains at low levels, but this is also protecting the market from further difficulties. For the next two weeks there should be little change and after that we should see gradual increases again.

What do we expect: We would say that the cow market has levelled out. Demand is steady and no excess of supply is pressing the market. The market for males still seems to have some further room before it hits bottom and although this may be not too much, it has definitely not yet fully been sorted out. However, we are still in the holiday period and progress in the US market could also offer support for the male market over here.