What happened this week: As expected we had to go through another quiet week of trading. With most of the trade busy trying to reach agreement with butchers over the market trend and abattoir prices, selling was not the focus of interest. In addition most players are waiting to see the results and impressions offered from the Bologna leather fair next week. This event is still the best indicator in terms and fashion and goods trends and, let’s not forget, it also offers a decent insight into the situation of the European tanning industry. In combination with Shanghai about six weeks ago, Bologna closes the round of important leather fairs and this traditionally marks the start of the winter production cycle. Although there was some bad news circulating the market this week, such as the cancellation of credit insurances for a major tanning group in Italy (already having been in the limelight for some time), further problems for UK and Irish suppliers to move enough product, and the continuing volatility in the currency markets — to name few — hope is rising that the market might be in the final lap of its correction phase and could eventually settle after Bologna.

Although there may still be a number of obstacles along the way which could cause a few ‘accidents’, there is certainly a realistic hope of some light (in the far distance) at the end of the tunnel. Leather business is still not showing any signs of slowing down and price reductions for raw materials are starting to reach levels where they are compensating for the margin problems facing a large part of the leather industry. The currency situation has certainly also changed the equation vs. a year ago but, all in all, things look much better today than they did six months ago. There are still a few imbalances to deal with in the market, but the majority of the trading levels and physical balances of material look better than a while ago. Considering that we are now starting the winter semester one can begin to prepare for the end of the depression large parts of the trade have been forced to with. Trading during the week was still light, but this was mainly due to the fact that buyers are still in bargain hunting mood and many of the bids which came in were turned down immediately as they were far below market levels. However, one can’t blame the buyers for trying as there is a large price gap between the offers and markets at present which must still lead them to believe that ‘anything goes.’

So, the few trades concluded were close to asking levels and the vast majority of bids and interest was turned down due to the low figures buyers had in mind. We don’t, however, exclude that they weren’t successful next door, because market opinions and individual positions are certainly not the same everywhere. Life was much easier again for dairy cows and low grades while due to the price competition from the UK, Ireland, France and the USA steers and ox/heifers had a much more difficult time.

The kill: The kill was a bit better this week, but still nothing to celebrate. Production is just about to meet the weekly requirements and not much of a weekly surplus is building. The slaughter should continue to move moderately higher. 

What do we expect:  We should know more by the end of the next week. The fair in Bologna will certainly not be easy because market opinions could not drift further apart. Buyers will do anything during the show to depress raw material suppliers who will be trying to push prices for the start of the season further down. Let’s see how strong the defence line is going to be. We expect mixed results within the grades and a corresponding reflection in prices. Some will still suffer others might be close to the ground.

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