Friedrich Sturm Report - 05.10.07
10/10/2007
What happened this week. As expected, this week has not offered many new indications or directions. Owing to the holidays in Asia and the holiday mid-week in Germany, market activity throughout the week was light.
Only towards the end of the week did we see a bit more interest, but nothing really worth mentioning. If there was anything worthy of note it was the fact that most enquiries were for male hides which had been a non-event for quite a while. However, it was pretty difficult to find price agreements, because German hides still look reasonably expensive in comparison to those from other origins.
It was rather a gamble on currencies again and, with the US dollar bouncing more than moving this week, it was a question of lucky timing to get some trades locked in.
Anyway, the good news this week was certainly, that there is still some interest out there—even for bulls. Most of the interest was for heavyweights as they are a bit more exclusive, while the lighter weights are still not competitive with other options the market has to offer. The demand for cows and Ox/heifers was limited in offers and in demand.
It is difficult to say for certain, but it seems that buyers are still living on the purchases they made during September and have no immediate need to buy again. The market has stalled at the moment and it seems that our last week’s reading, that it will take time now to determine the outlook for the rest of the year, was quite accurate.
Despite the general pressure on the market in the euro region it is also true that tanners in general do not carry too much inventory. Knowing that their calculations do not allow for any price increases or may even require further reductions, they are trying to wait the market out. This is in the hope that sellers become desperate enough to lower their prices, even in the short term to stimulate sales.
At the moment it doesn’t seem, that any party is willing to make the first move. Everything points to the Lineapelle fair in mid-October being the time and place for the final showdown. The biggest problem remains the fact there is a shortage of cheap hides and a moderate surplus of expensive hides.
To put it another way, there may not be enough hides available at the prices buyers want to pay, while there are too many hides that cannot command the prices sellers feel they need to secure for them. Even though this situation isn’t really new, it seems that the market is unable to offer any solution to it yet.
The few sales that did take place this week left prices almost unchanged, or just a fraction lower. This can hardly be called representative of the market in general.
The kill. It is still on the lower side of seasonal expectations. The weather is still good and grass is still growing. Weights are also still lagging behind, so the feel of autumn hasn’t really arrived yet. One can, however, see already the winter coming, with the cattle in the fields changing hair rapidly. We have little reason to believe that there will be much change in the near future.
What we expect. We have few expectations for the next week. We hardly expect any major change and are just sitting back and waiting for the trigger which could send the market in either direction. With the price correction we have seen recently, some of the pressure on prices has eased. Anything can happen now, with the only question centring on which side—demand or supply—will move first.
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